Gold prices weakened Wednesday after setting a new record closing high in the previous session as concern over the health of the European banking sector ebbed.
Gold futures for December delivery, the most heavily traded contract on the Comex division of the New York Mercantile Exchange (CME), rose above $1,260 an ounce in early trades but ultimately closed down $2.50 at $1,257. On Tuesday the precious metal, which is thought to offer a hedge against financial instability and inflation, rose $8.20 to settle at $1,259.30 an ounce, surpassing its old nominal record closing high set in late June.
On an inflation-adjusted basis gold would need to more than double to break the real all-time high of $2,358 set in early 1980, when the federal funds rate stood at about 12%. Today's fed funds target rate stands at 0% to 0.25%.
Strong demand at an auction for Portugal's sovereign debt helped allay European debt fears Wednesday, allowing major market indexes in the U.K. and Continent to erase earlier losses. The euro gained against the dollar, hitting $1.2745 in late morning trades.
Gold prices have risen sharply over the past three weeks as the euro has come under pressure. See the chart below, courtesy of Capital IQ.
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