Gold Prices Fall as Traders Lock In Gains

Gold prices retreated from five-month highs as some investors locked in profits ahead of the weekend.

The most actively traded gold contract, for February delivery, ended $8.10, or 0.6%, lower at $1,292.60 a troy ounce on the Comex division of the New York Mercantile Exchange.

Some investors chose to trim their gold holdings after prices of the precious metal reached five-month highs on Thursday in response to a larger-than-expected bond-buying program from the European Central Bank. The policy move, announced Thursday, had helped gold prices close above $1,300 an ounce for the first time since August.

Gold has been one of the top-performing commodities so far in 2015, as investors around the world rushed to safeguard their wealth amid volatility in stocks and currency markets.

The precious metal also holds the promise of preserving purchasing power at a time when yields on developed-market debt have dropped and in some cases turned negative, effectively charging investors a fee for using their money. Gold doesn’t earn interest or dividends, delivering returns primarily through capital gains. When yields on other safe assets, such as U.S. Treasurys or German government bonds, are low or negative, it bolsters the allure of the precious metal.

And, while gold in dollar terms hit a rough patch in recent years, the precious metal has done better when priced in other currencies. Gold prices in euros are up 18% so far this year, compared with a 9.2% gain in dollar terms. Last year, gold prices climbed 12% in euros and Japanese yen, compared with a 1% drop in dollar terms.

“Gold held in non-U.S. dollars has been a very good place to be over the past 12 months,” said Michael Shaoul, chief executive at Marketfield Asset Management in New York. Mr. Shaoul manages roughly $9 billion and has recently purchased gold-mining equities as a bet on higher gold prices.

To be sure, some investors are betting that gold will give up its gains when the Federal Reserve follows through on plans to raise interest rates later this year. The central bank has telegraphed its intention to normalize U.S. monetary policy by ending a historic period of near-zero rates once the economy demonstrates sufficient momentum.

“The next 12 months for gold will probably be challenging as the Fed starts to hike,” said Nicholas Johnson, a portfolio manager with Pimco’s $20 billion Commodity Real Return Strategy Fund . Mr. Johnson has been adding to his fund’s bearish gold-futures wager in recent weeks, initiating the wager when gold prices crossed above $1,260 an ounce.

Gold traders now turn their sights to Greece. The eurozone member is set to hold parliamentary elections on Sunday. The leftist Syriza party is ahead in the polls, reviving talk of Greece’s possible exit from the eurozone. The election also has put the country’s negotiations for further financial aid on hold.