Gold Futures Drop Below $900

Gold futures were falling Tuesday as investors sold the precious metal to raise cash amid worries about the spreading swine flu.
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Gold futures were falling Tuesday as investors sold the precious metal to raise cash amid worries about the spreading swine flu.

August futures were sinking $19.80 to $890.10 an ounce at the Comex division of the New York Mercantile Exchange. The contract has traded as low as $887.30 and as high as $908.50 so far during the session. Silver futures were falling 54 cents to $12.41 an ounce, and copper prices were slipping 6 cents to $1.93 a pound.

Worries that a pandemic will slow economic recovery, and news that

Bank of America

(BAC) - Get Report

and

Citigroup

(C) - Get Report

may need more capital usually would be a catalyst for gold futures. Typically investors buy up the precious metal in times of market uncertainty as a safe haven investment. Instead gold prices were sinking.

George Gero, vice president of global futures at RBC Capital Markets, says there are plenty of events contributing to gold's decline. Investors are instituting "sell stops because everything is selling on fear of the swine flu.

There are also less inflationary expectations."

Another event contributing to gold's selloff is options expiration. Many investors wound up with more future contracts than they expected, forcing them to sell. Gero believes "we may see a bounce back later on but

for now everybody...

is in raise cash mode."

Physical demand for the precious metal is also slowing. China has been buying up its gold reserves but India's purchasing has slowed significantly over the last three months since gold hit the $900 level.

"It

will take time, lower prices ... and disposable income ... for India to get back in." Gero believes a hope for gold is ETF holders. If they continue to buy on a dollar cost average basis, they could offset current producer selling.

In other metals, copper, palladium and platinum were also selling off. These precious metals are used in car production and levered to the auto industry. "They are reacting to questions

about what will happen to the whole complex.

General Motors

(GM) - Get Report

nationalization prospects

and the swine flu lowering economic expectations", says Gero.

In gold stocks,

Newmont Mining

(NEM) - Get Report

was down more than 2% to $40.55, while

Barrick Gold

(ABX)

was sinking 2.68% to $29.19. Shares of

Yamana Gold

(AUY) - Get Report

were down 1.70% to $7.94.

Agnico-Eagle Mines

(AEM) - Get Report

was dipping 2.50% to $45.92, and

Gold Shares

(GLD) - Get Report

exchange traded fund was down 1.66% to $87.25.

Alix joined TheStreet.com TV in February 2007. Previously, she held positions in film and theater production, management, and legal administration. Alix has a degree in communications and theater from Northwestern University.