Gold Drops After US Economy Expected To Improve

Gold fell from a three-week high in New York on speculation that signs of an improving U.S. economy will curb demand for a haven. Palladium declined from the highest price since August 2011.

The Bloomberg Dollar Spot Index advanced for a third day before data that may show a manufacturing gauge rose for a second month and after a report yesterday showed retail sales increased more in March than economists forecast. Palladium futures slipped as much as 2.4 percent today, after climbing the previous five sessions.

Gold gained yesterday as tension in Ukraine sparked concern that more sanctions will curb raw-material supplies from Russia, the largest palladium producer. Last year, gold futures slid 13 percent in the two sessions through April 15, the biggest two-day slump in three decades and marking bullion’s entry into a bear market. The commodity has rebounded 8.5 percent this year.

The metal has been “pressured by very strong retail sales data from the U.S.,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., wrote in a report. “We expect the upside to be checked by weak physical demand from China and evidence that the U.S. economic recovery is gaining momentum. At the same time, we believe the downside to be protected by lingering worries that the Ukrainian situation could spiral out of hand.”

Gold for June delivery fell 1.7 percent to $1,304.80 an ounce by 7:50 a.m. on the Comex in New York. It lost as much as 1.9 percent, the biggest intraday drop since March 24, after reaching a three-week high of $1,331.40 yesterday. Futures volume was 40 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery declined 1.8 percent to $1,304.42 in London, according to Bloomberg generic pricing.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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