08/25/2011 10:59 EDT | Updated 10/25/2011 05:12 EDT

Gold Prices Suffer Setback As Investors Pull Back


The price of gold plummeted some $200 in Thursday trading from its record highs earlier this week, taking the steam out of a commodity that has been breaking one price record after another all month.

Gold was trading at $1,731.30 at 10:20 a.m. EDT, having hit an all-time high earlier this week of $1,911.46 in Asian trading.

Gold rallied massively late last month and early this month as stalled negotiations over the U.S.'s debt ceiling sent investors fleeing to safe havens. That in turn sparked speculation on whether gold is in a bubble.

The drop in gold prices took its toll Thursday on the commodities-heavy Toronto Stock Exchange. The S&P/TSX composite index was down 117 points at 10:45 a.m. EDT, trading at around 12, 226.

Reuters reports that investors are pulling back from gold ahead of the Jackson Hole, Wyoming, economic conference this week, where central bankers will meet to discuss the possibility of the Federal Reserve pumping more cash into the economy.

Investment appetite for gold has cooled ahead of a widely awaited central bankers' meeting at Jackson Hole, Wyoming, as speculation grows over whether or not the Federal Reserve will signal a further round of U.S. monetary easing.

More quantitative easing -- or money printing -- from the Fed could significantly lift gold, but it could have further to correct if no additional action is signaled.

The Canadian dollar jumped 0.45 of a cent against the American currency to 101.81 cents US.

Bank stocks advanced after National Bank (TSX:NA) turned in earnings which beat expectations. The Montreal-based bank handed in a $312-million profit in its fiscal third quarter, up 15 per cent from the year earlier with the help of special items. Excluding special items, the bank’s net income would have been $293 million, up seven per cent, resulting in $1.72 per share of profit, beating analyst estimates by a penny. Its shares gained 47 cents to $72.82.

Royal Bank, (TSX:RY) which reports earnings Friday, rose 46 cents to $51.74.

American markets were higher a day before a widely-anticipated speech by U.S. Federal Reserve chairman Ben Bernanke while traders took in news that Warren Buffett’s Berkshire Hathaway will invest US$5 billion in Bank of America. The news pushed the bank’s shares up $1.77 opr 25 per cent to US$$8.76.

Bank of America shares had fallen sharply recently as doubts rose about the bank's' capital position.

The Dow Jones industrial average gained 42.16 points to 11,362.87.

The S&P 500 was ahead 6.32 points to 1,183.92 while the the Nasdaq composite index was up 4.16 points to 2,471.85.

Shares in Apple Inc. were off $4.53 to US$371.65 after Steve Jobs announced he was departing as the tech giant's CEO and passed the job to Tim Cook, the company’s chief operating officer.

Shares in rival Research In Motion (TSX:RIM) were ahead 44 cents to $28.69 as the company said it is rolling out a new music sharing service for BlackBerry customers who use the smartphone’s popular instant messenger. BBM Music is a cloud-based service that allows those using BlackBerry Messenger, or BBM, to access and share music.

With files from The Canadian Press