Gold trading still rocky

In London this morning (August 28th) the price of spot gold first rose slightly and then fell to $655.50/656.10 per ounce.

The bank holiday break in the UK meant no trading on Monday, but Tuesday's drop was down considerably on the previous day's trading on the New York Mercantile Exchange, where the precious metal valued late on at $657.60/658.20 per ounce.

The credit squeeze in the US economy has not led to a continuous rise in demand for the 'safe-haven' investment in gold, as is often the case when worries emerge over banking and credit.

Current values of the metal are down five per cent from a peak in April, although investors buying gold have still increased overall by three per cent since the beginning of the year.

Last week saw a dramatic sell-off in financial markets that threatened to destabilise commodity prices, with gold investments cashed in by many to cover margin losses elsewhere.

But while this gold sale brought its value to a seven-week low, John Reade, head of metals strategy at UBS, told Reuters that gold could well regain its traditional attraction to investors.

"In this environment we believe there is a meaningful chance that gold will attract the safe haven bid that has been so far mostly absent during the credit crunch."