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Gold's safe haven status is starting to slide as metals take a beating.

Robin Bromby From: The Australian April 19, 2010
PURE SPECULATION

TRADERS who went into the weekend holding positions in metals stocks will have had a nervous two days.
Gold was down $US23 an ounce on Friday, or 2.01 per cent, to $US1137.

Silver was badly damaged -- down 4.1 per cent, closing at $US17.67/oz.

There was also carnage in the base metals: zinc took the big hit with a 3.3 per cent decline, lead was down 3.2 per cent and copper fell 2.3 per cent.

Nickel and aluminium dropped, too; only tin was resilient.

This all followed the news of Goldman Sachs being charged with fraud and earnings at Google failing to meet the consensus.

As David Thurtell at Citigroup noted: "We're not sure how the Goldman or Google news changes the outlook for base metals consumption, but suspect the longs were looking for an excuse to take some money off the table after the recent stellar run." He says US housing starts were up for the third month in a row and he expects a strong April.

Other commentators were left wondering why gold had fallen so sharply. After all, when financial crises loom, gold is meant to be the safe haven. And the US dollar moved only very slightly upwards on Friday.

Perhaps in the back of traders' minds was the latest gold report from London-based analyst GFMS. Until now, the GFMS crowd has been fairly bullish on gold, so it was a little chilling to read that they believe the gold rally is reaching its endgame.

What has got them worried is the fall in jewellery demand; last year investment demand surpassed jewellery fabrication as the main user of gold for the first time since 1980 (the metal's last big bull run).

Scrap reached record volumes last year -- and, to judge by all the advertisements for people to sell their old jewellery, that source may continue to weigh on the market. GFMS thinks the questions over several major currencies will continue to drive investment in gold, but the consultancy sees a receding likelihood of another financial crisis that would drive gold higher. Only a "hefty drop in prices" would revive jewellery demand and deter people from selling their old rings and necklaces for scrap.