What's bugging gold?

Gold usually shines in a crisis. But thanks in large part to changing views of China, the problems swirling in Europe and Korea have barely budged gold prices.

In just the past week, Ireland has been forced to take a bailout, Portugal has claimed it doesn't need any money and Spain has warned that speculators who bet against its bonds are cruising for a bruising. Oh, and North Korea started shooting at South Korea.

None of these events serves to make the globe look safer for investors or anyone else, for that matter. Yet gold, which has been known over the years as the go-to investment at times of distress, hasn't caught fire, in contrast to its breakouts in some earlier crises.

Gold futures for December delivery recently fetched $1,362 an ounce. That's down more than 3% from last month's nominal record above $1,400.

Part of the answer no doubt lies in the breakneck pace of gold's rally this summer. The price soared some 20% between late July, when investors began anticipating a new round of Federal Reserve aid, and early November, when the Fed announced the launch of the second round of quantitative easing. After that runup, even longtime gold bulls were heard predicting a pullback

But another explanation centers on a changing view of China's role in the global economy and financial markets.

This summer, demand from the world's fastest-growing big economy was seen as an irresistable force driving a global commodity price spike. China's thirst for growth and its demand for natural resources would spur a multiyear boom in markets for food, agricultural products, metals and other goods.

But now, facing worrisome food price inflation, China is tightening monetary policy in an effort to quell some of that demand. It has tightened bank reserve requirements twice this fall, and is expected to do so again in coming months.

With China and other emerging economies trying to keep a lid on the hot money surging in from slow-growing rich countries, the one-way bet on rising global commodities prices is suddenly looking like much less of a sure thing.

"Chinese tightening poses a negative for the 'risk trade' via the potential of hampering demand for commodities," writes CMC Markets strategist Ashraf Laidi. "In contrast, last spring's Greece crisis was a green light to buy gold" against both the dollar and the euro.

None of this is to say the green light for buying gold won't come on again. The dollar has rallied strongly against the euro in recent weeks as the Irish crisis has come to a head, and any success in defusing problems there may reignite the sell-the-dollar trade. At the same time, an escalation of either the European or Korean crises could spur new gold buying.

It is far from clear that the monetary moves China has made will be enough to cool down its economy or trim demand for commodities.

And over the longer haul many of the dynamics that have accompanied gold's rise remain in place. China and other developing world cental banks are buying gold to diversify their dollar and euro holdings; negative real interest rates, which have a strong link to a rising gold price, appear likely to remain in place in the West for some time.

But if nothing else, the past month has offered a reminder that no trade goes one way forever -- which means the gold pullback, as unexpected as it has been, could yet go much further.