By Deborah Levine and Sarah Turner, MarketWatch
NEW YORK (MarketWatch) — Gold futures turned down in early U.S. trading Wednesday, after recovering a small portion of their losses from the previous day when the precious metal suffered its biggest drop in roughly six months.
Gold for February delivery (GCG11 1,378, -0.60, -0.04%) traded at $1,376.50 an ounce on Wednesday, down $2.60, or 0.2%.
On Tuesday, gold closed at $1,378.80 an ounce, a drop of $44.10, or 3.1% — its worst one-day performance since July — as investors shunned the metal amid optimism on the global economy. See full story on gold’s slide.
Silver and copper futures also tumbled Tuesday and continued lower Wednesday despite having been in positive territory during the Asian and European sessions.
March silver futures (SIH11 2,930, -20.80, -0.71%) fell 32 cents to $29.18 an ounce, while March copper futures (HGH11 432.05, -4.85, -1.11%) declined 7 cents, or 1.5%, to $4.30 per pound.
The main theme of the past 24 hours has been a heavy unwinding or profit taking on positions that had performed well during holiday-thinned trading, according to analysts at RBC Capital Markets. “Foremost in this regard are long commodity positions.”
Also weighing on metals, the U.S. dollar extended its gains, which tend to affect the value of dollar-denominated commodities.
The dollar stretched its gains against the euro (EURUSD 1.3178, -0.0134, -1.0071%) , trading at $1.3217. Against the Japanese yen, the U.S. unit (USDYEN 82.7600, +0.7900, +0.9634%) extended gains to buy ¥82.30. Read more on the dollar.
Gold surged 30% in 2010, repeatedly hitting fresh highs, while other metals also put in strong performances.
Commodity strategists at MF Global said that they believe gold futures will continue to advance this year.
“Given the ongoing issues in Europe, coupled with concern about the [Fed’s so-called QE2 program] and the recent Obama tax compromise, we should see investor demand for gold remaining intact for most of 2011, as confidence in paper currencies continues to erode,” they said.
But “the complex could see its share of rather sharp setbacks, particularly if various crises force investors to seek the safety of the dollar,” the strategists said.
