Gold closed at the lowest price in a week as a rebounding dollar and tumbling crude prices inflicted downward pressure.
Gold for June delivery on the Comex division of the New York Mercantile Exchange decreased $20.9 or 1.7 percent to $1,206.7 per ounce. Trade ranged from $1,205.1 to $1,225.5, retreating from yesterday’s three-month high of $1,230
The dollar is up more than 2.5 percent against the euro through the week at $1.1157 currently, while speculation continues over the US slowdown in the first quarter and when the Fed will normalise monetary policy.
“Gold didn’t gather any momentum after the break of $1,225 and has instead come back to test support and dip buying strength,” Triland Metals said. “But if these levels fail and gold slides back through $1,200 it would be all too typical of the leading precious metal.”
The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008.
At its last meeting, the Fed policy board removed all calendar references in its forward guidance and said that recent economic weakness might be “transitory” in nature. This means that bank is now entirely data dependent and a rate increase could happen at any future meeting.
The minutes of the most recent FOMC meeting will be released on Wednesday.
“That said, the impending normalisation of interest rates could spell a new paradigm for precious metals and whilst the bulls don’t seem to gather much follow through the gold bears are also struggling to find much more below $1,200 (having had it their own way for four years),” Triland added.
In US data, April building permits were at 1.14 million, ahead of the forecast 1.06 million. April housing starts rose to 1.135 million from 0.93 million in March, while estimates were pegged for 1.02 million.
“US housing data was much stronger than expected in April, bolstering the dollar – this is one of the sectors that we believe will figure highly in the FOMC’s decision on when to raise rates,” FastMarkets analyst Tom Moore said. “Renewed dollar strength will return downside pressure to metal prices, capping the gains made while it corrected recently.”
But the recent run-up of the dollar will be brief while weakness in the US economy continues, INTL FCStone analyst Ed Meir predicted.
“Should we get another burst of buying in the dollar, we could see the pressure mount on gold, but we suspect that rallies in the greenback will likely be short-lived given the likelihood that the US economy will continue to show signs of ongoing weakness,” he said.
In US equities, the Dow Jones industrial average was up 0.2 percent, while the S&P was unchanged.
In other precious metals, Comex silver for July delivery fell more than six cents to close at $17.071 per ounce. Trade ranged from $16.87 to $17.735. Platinum futures for July delivery on the Nymex declined $28.1 to $1,150.4, while the most-actively traded palladium contract was at $775.15, down $17.85.
Light sweet crude (WTI) oil futures on the Nymex were down $2.13 or 3.6 percent at $57.30 per barrel.
(Editing by Tom Jennemann)
The post Gold drops to lowest price in a week as the dollar rises, oil sinks appeared first on The Bullion Desk.
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