Gold prices regressed for the second straight day as investors returned capital into US equities and the dollar.
Gold for December delivery on the Comex division on the New York Mercantile Exchange declined $13.70 to settle at $1,124.60 per ounce. Trade ranged from $1,116.90 to $1,146.0.
“The rally we have seen recently was overdone. With the market as short as it was the move was somewhat inevitable and this fuelled the rally rather than the concept of gold being a safe haven during times of turmoil,” Marex Spectron noted.
In news, New York Federal Reserve president William Dudley said today that a September hike is now “less compelling to me than it was a few weeks ago” given the deteriorating conditions outside of the United States.
The Federal Open Market Committee (FOMC) is in an intense debate over the exact timing of increasing the federal funds rate.
After lingering at near zero levels since December 2008, the FOMC is trying to juggle persistently low inflation and the growing Chinese contagion, which has leaked into US equity markets.
The Federal Reserve hasn’t increased interest rates in over a decade, but Chairwoman Janet Yellen has expressed a desire to normalise rates in 2015.
The CME Group FedWatch – a tool to gauge market expectations of a rate hike – stood at 24 percent and has fluctuated between zero and fifty the past month.
“With financial markets now attaching a lower probability to a Fed rate hike this year, the market impact will be more substantial if the Fed decides to hike as we still expect,” ABN AMRO said in a report.”Then, financial markets will adjust upwards their interest hiking expectations for this year and next year.”
“This will spur the US dollar and result in lower gold and other precious metal prices,” the report added.
In US equities, the Dow Jones industrial average and S&P were last up 1.8 percent and 1.7 percent, while the dollar was was 1.3 percent stronger at $1.1365 against the euro.
Key data points the Fed and market participants will be watching is tomorrow’s US weekly unemployment claims, along with the Jackson Hole Symposium and the non-farm US payroll data released on September 7.
In strong US data today, durable goods orders month-over-month was up 0.6 percent, above the forecast of -0.4 percent and the revised figure was changed to 3.4 percent.
Core durable goods orders month-over-month jumped two percent, smashing expectations of a 0.3 percent uptick.
Meanwhile, inflows into gold ETFs continued – holdings in the funds tracked by FastMarkets have increased to 1,536.95 tonnes.
As for the other precious metals, Comex silver for September delivery was last down 54.5 cents at $14.065 per ounce. Trade has ranged from $13.910 to $14.705.
Platinum for October delivery on the Nymex rose $0.70 to $977.40 per ounce, while the most-actively traded palladium contract was at $527.60 per ounce, down $12.50.
(Editing by Tom Jennemann)
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