By Seeking Alpha,
November 27, 2009 at 3:32 PM
Mark O'Byrne submits: GoldGold reached new record highs at $1,195/oz yesterday but has experienced the much anticipated correction overnight. Gold is currently trading at $1,157/oz, and in Euro and GBP terms is trading at €777/oz and £706/oz, respectively. Gold is down some 3% and the correction is likely due to a combination of factors. After gold's recent sharp gains, a much needed correction and consolidation was expected and profit taking was due also. The primary factor in gold's sell off is not risk aversion per se. Rather, the speculative leveraged players going to cash in the very short term due to turmoil in equity markets due to the uncertainty created in the light of the Dubai default. Sell offs like this have been common when international equity markets sell off sharply. Gold becomes correlated with equities in the very short term but what has happened so far in this bull market and will likely continue (as long as gold remains in a bull market) is that gold generally falls by less in the sell off and then bounces back quicker in the aftermath of the sell off. »