Gold Falls After Positive US Data

Gold fell in New York as expectations for higher U.S. interest rates and a stronger dollar countered haven demand amid tension in Ukraine and Gaza.

The dollar reached a one-month high against a basket of 10 major currencies before data may show today that U.S. inflation held at the fastest pace since October 2012, supporting the case for the Federal Reserve to tighten monetary policy. Gold slid 28 percent last year on expectations the central bank will scale back stimulus as the economy improves.

Unrest in the Middle East and Ukraine helped prices rebound 9 percent this year. European Union governments labored to identify more Russian businesspeople and companies to sanction and pressed President Vladimir Putin to speed a probe into the downing of Malaysian Air flight MH17 or face isolation. U.S. Secretary of State John Kerry held talks with Egyptian officials on crafting a truce to end Gaza Strip fighting.

“While gold may get some support from unrest around the world, the longer term downtrend is intact because of the expectations for higher U.S. interest rates,” said Lv Jie, an analyst at Cinda Futures Co., a unit of one of four funds in China created to buy bad debt from banks. “Improving U.S. economic data is positive for the dollar which in turn weighs on gold.”

Gold for December delivery fell 0.5 percent to $1,309.50 an ounce by 7:39 a.m. on the Comex in New York. It has retreated from $1,346.80 on July 10, the highest since March 19. Bullion for immediate delivery lost 0.4 percent to $1,307.61 in London, according to Bloomberg generic pricing.


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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