Gold Rally Loses Steam as USD Recovers

Gold fell, cutting the biggest weekly gain since June, as improving U.S. economic data strengthened the dollar and cut demand for a haven.

The Bloomberg Dollar Spot Index rose for a second day after U.S. data released yesterday showed a healthier job market and rising consumer confidence. Bullion is still set for a 2.6 percent weekly advance as investors pushed back bets for when the Federal Reserve will raise interest rates.

Gold reached a two-week high yesterday, rebounding from this year’s low set Oct. 6, after Fed minutes showed some policy makers were concerned about economic growth. An improving economy this year had added to the case for less U.S. stimulus. Rising interest rates reduce gold’s allure because the metal generally only offers investors returns through price gains, while a stronger dollar typically cuts demand for a store of value.

“The dollar staged a small comeback, which in turn led to profit taking in the metals,” David Govett, head of precious metals at Marex Spectron Group in London, said in a note today. “The markets do not want to get ahead of themselves and need to consolidate now rather than attempt lift off.”

Gold futures for December delivery fell 0.1 percent to $1,223.50 an ounce by 7:33 a.m. on the Comex in New York. The metal for immediate delivery in London lost 0.1 percent to $1,223.25 an ounce.

Futures trading volume was 3 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg show. The commodity slid to $1,183.30 in New York on Oct. 6, the lowest since Dec. 31.

Money managers have cut their net-long position, or bets on higher prices, to the lowest this year, U.S. government data show. Holdings in gold-backed exchange-traded products are at a five-year low, data compiled by Bloomberg show.

Silver futures for December delivery lost 0.6 percent to $17.31 an ounce in New York, after sliding as much as 1.2 percent. Platinum for delivery in January declined 1.3 percent to $1,261.50 an ounce. Palladium futures for December delivery fell 1.1 percent to $791.70 an ounce.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza