Gold Rally Erodes Interest

Gold today traded below its two months high as the rally was seen as damping physical and investment demand. Last week gold had crossed the $1,300 per ounce mark for the first time after many months. Gold for August delivery traded at $1,315.60 an ounce on the Comex in New York from $1,316.60 on June 20. Investors boosted their bullish positions 30 percent to 66,572 contracts, the biggest gain since February, U.S. Commodity Futures Trading Commission data show.

The higher gold price has dampened the physical demand for gold in China and India two countries that love to buy the yellow metal. Gold eased further from a two-month high on Monday on stronger equities and sluggish physical appetite, even as safe-haven demand from escalating violence in Iraq kept the metal above $1,300 an ounce. Analysts are worried and want to know whether the recent gold rally has got legs and will gold prices stay above $1,300 per ounce. Many traders think this $1,300 level to be psychologically important.