Original article found on wsj.com
Gold prices edged lower on Wednesday as a stronger dollar and gains in equity markets tempered investor appetite for the haven asset.
The most actively traded contract, for December delivery, was recently down 70 cents, or 0.1%, at $1,139.10 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold rallied to a one-week high on Tuesday as turbulence in global stocks and fears of an economic downturn in China sparked a rush to assets perceived as low risk, like precious metals. Gold doesn’t derive its value from a country or government and has historically weathered financial and economic upheaval better than stocks and bonds, whose value is backed by private or public institutions.
But as stability returns to global stock markets, gold’s allure is fading. The S&P 500 stocks index was recently up 1% at 1933, while the Dow Jones Industrial Average is up 1.1% at 16,236.
“There’s just a lack of enthusiasm for gold,” said John Payne, senior market analyst with Daniels Trading in Chicago.
A stronger dollar, which rallied against the euro, the Japanese yen and other currencies, also weighed on gold prices. The Wall Street Journal Dollar Index was recently up 0.4% at 88.51. Gold is a dollar-denominated commodity, and becomes more expensive for other currency-holders to buy when the greenback gains.
Looking ahead, uncertainty around China’s economy is likely to be good for gold, which is typically seen as a safe-haven asset.
“Continued concerns over China and the contagion from there seem likely to underpin interest in gold,” William Adams, head of research at Fastmarkets, wrote in a note.
China has sparked volatility in financial markets, after a series of economic stumbles and a spate of government interventions. The Asian giant accounts for almost a quarter of global gold demand.