GOLD DRAGS MARKETS DOWN.

Gold lost some of its shine on Wednesday as a resurgence of confidence in the state of the global economy made the precious metal less attractive as a safe haven for investors.

The precious metal fell US$51.30 to US$1,642.90 an ounce Wednesday, and oil prices slipped US$1.28 to US$105.43 a barrel, causing a sharp drop for Canada’s benchmark stock index on a day when most other markets managed at least small gains. The S&P/TSX composite index fell 159.79 points, or 1.27%, to 12,377.90 Wednesday. Nine of 10 sub-indexes declined, led by materials, which fell 3.45%, and energy, which dropped 1.89%. Canada’s junior Venture exchange fell 33.02 points, or 2.03%, to 1,594.35.

In the U.S., the Dow Jones industrial average managed a slight gain, rising 16.42 points, or 0.12%, to 13,194.10, and the Nasdaq composite, after spending the day in negative territory, closed just above flat at 3,040.73, with a gain of less than one point, or 0.03%.

“The gap between the Dow and the TSX widened sharply further on Wednesday, moving out above 800 points from a level position just three months ago,” BMO Capital Markets deputy chief economist Douglas Porter wrote in an afternoon note. “The divergence is even starker going back a year — this week in 2011 saw the TSX more than 2,000 points above the Dow. The very different paths are due to many factors: the wildly differing performances of tech, weakness in Canadian energy and resource shares, and the recovery in U.S. financial and consumer stocks, to name a few.”

The decline on the S&P/TSX wiped out gains of the previous day when markets surged following U.S. Federal Reserve chair Ben Bernanke’s statements pointing to a slow but steady improvement in the economy. Those comments were good for equities on Tuesday, but removed some of gold’s appeal a day later.

“With the Fed statements (Tuesday) and the data coming out of the U.S., the market is getting a lot better,” Greg Taylor, a money manager at Aurion Capital Management in Toronto, told Bloomberg. “With that happening, people don’t need their insurance policy, which has been gold.”

Financials were the only sub-sector to advance in Toronto and also led gains in the U.S., after the Fed released largely positive results of its stress tests on U.S. banks.

“You have the Fed putting an approval rating on a lot of these banks saying: we’re comfortable with their financial position,” Andrew Slimmon, managing director of global investment solutions at Morgan Stanley Smith Barney, told Bloomberg. “Then, you look at their valuation and, boy, these stocks are very cheap. It certainly furthers the willingness to put money to work.”