Gold Lower After a 7 Day Rally With USD Rebound

Gold eased on Friday as traders booked profits after a seven-day rally and as the dollar rebounded on strong U.S. data, but the metal still looked set to post its second straight weekly gain on expectations U.S. interest rates will stay low for longer.

Tensions in the Middle East after Saudi Arabia and its allies launched air strikes in Yemen provided some support to gold, typically seen as a safe-haven asset.

Spot gold eased 0.3 percent to $1,199.95 an ounce by 0755 GMT. The metal jumped on Thursday to $1,219.40 – its highest since March 2 – in a knee-jerk reaction to the attacks in Yemen. It later pared gains to close near $1,200.

“Gold is weakening because of profit-taking and a slightly
stronger dollar,” said Ronald Leung, chief dealer at Lee Cheong
Gold Dealers in Hong Kong. “I don’t think traders would want to commit too much unless
things worsen in Yemen,” said Leung. Prices could consolidate around $1,200 in the near term, he said.

Gold tends to be an investor favourite when geopolitical tensions rise and risk-appetites dip. However, its failure to hold on to 3-1/2-week highs reached on Thursday made traders cautious over the price outlook.

“Although the metal breached the 100 day moving average (near $1,208) during the session, it failed to close above the indicator, which may signal that this latest run is nearing an end,” said MKS Group trader James Gardiner.

Oil prices also gave up some overnight gains as markets believed the threat of a disruption to world crude supplies from the Saudi Arabia-led air strikes in Yemen was low.

via Reuters

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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