Gold tries to regain footing after nervous week
Spot gold managed to add almost $10 an ounce on Friday to change hands at $1,655 in afternoon trade, but failed to recover much from a week that saw the metal give up more than 2% or $35 in value.
Gold has been losing ground ever since the US Fed's announcement on December 12 of a major shift in monetary policy.
Conventional wisdom in the gold market has been that when central banks flood the markets with cheap money under quantitative easing programs gold benefits thanks to its status as an inflation hedge.
But that link now appears to have been severed.
Despite Fed purchases that now top a whopping $85 billion a month and chairman Ben Bernanke's promises of ultra-loose policy well into 2015 gold's performance since hitting a 2012 peak of just under $1,800 in February has been lacklustre.
Even a breakdown in fiscal cliff talks which if they fail could topple the US back into recession has done nothing for gold which is traditionally seen as a safe haven asset in times of trouble.
MarketWatch quotes John Person, president of NationalFutures.com on gold's unexpected behaviour as the metal enters the final days of a possible 12th year of gains:
“When a market should be acting bullish on bullish news yet does not, it represents a nervous condition,” [and] “when investors are nervous, they tend to stay out or sell, regardless what market it is.”