Gold Drops Pressured by Strong USD

Gold prices in Europe were slightly lower on Wednesday, as largely sideways trading was buffeted by dollar headwinds. 

Spot gold was trading at $US1,158.51 a troy ounce, down 0.3 per cent, in morning European trade — remaining within a tight $US8 range. 

The yellow metal was “beholden to currency moves” and a strengthening dollar was keeping it under pressure, David Govett, head of precious metals at brokerage Marex Spectron, said. 

Gold is a dollar-denominated commodity and, as a result, it becomes more expensive to buy for those holding other currencies when the greenback gains. This typically leads to demand easing and prices coming off. 

Even the eurozone’s renewed financial woes haven’t been enough to keep gold afloat. 

“Despite the economic uncertainty we are facing — especially with regards to Greece and the slowdown in Japan, the eurozone and China — the dollar appears to be the top pick as a safe haven asset, leaving gold to play second fiddle,” said Howie Lee, an investment analyst at Phillip Futures. 

Other precious metals were mixed. Silver was up 0.03 per cent at $US15.643 an ounce, platinum was down 0.2 at $US1,125.40 an ounce, and palladium was up 0.01 per cent at $US801.10 an ounce.

via Herald Sun

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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