Gold Futures Drop as Investor Fear Wanes

Gold futures were falling Thursday as investor optimism decreased demand for the precious metal.

June futures were slipping $16.20 to $884.30 an ounce at the Comex division of the New York Mercantile Exchange. The contract has traded as low as $880.10 and as high as 900.80 so far during the session. Silver futures were down 40 cents to $12.35 an ounce and copper was rising 3 cents to $2.04 a pound.

Gold declined for the second straight month as investors' appetite for risky equities grew as global economies stabilized.

"Aside from the pop [from] China's central bank purchase, gold [prices have been steady] under $900", says Jon Nadler, senior analyst at Kitco.com. "The broad range of $850 to $950 is still in play. At this point, we will test lower levels [of] $860 to $870 to see...buyers emerge."

Gold bugs hoped that India's buying festival this week would boost physical demand, but sales were only up 14% on a value basis. The profit was higher because of rising gold prices, but the actual tonnage sold was lower than expected.

Hopes now turn to Mother's Day, typically a big gold jewelry buying event. Sales are expected to be lower by almost 20%.

"Investors are [just] not spending as much on gold as [they did in] Q1 of this year or Q3 or Q4 last year", says Nadler. "Incrementally they are holding on to higher levels than in previous years, but the [doomsday] scenario has stopped playing a role in buying."