Gold Declines as Dollar Weighed Against Global Tensions

New York (July 18)  Gold fell in New York, retreating from the biggest advance in four weeks amid tension in Ukraine and the Middle East, as a stronger dollar curbed demand. Palladium traded below the highest price in 13 years.

Gold rose 1.3 percent yesterday after a Malaysia Airlines plane was shot down over Ukraine and Israel sent ground forces into the Gaza Strip. Russia and Ukraine blamed each other for the downing of the Boeing Co. 777 jet over the eastern region of the country, which killed all 298 people on board.

Gold has rebounded this year from the biggest annual drop in three decades as U.S. policy makers pledged to keep interest rates low and unrest in the Middle East and Ukraine spurred haven demand. Prices are still set for the first weekly loss in seven as Federal Reserve Chair Janet Yellen said benchmark rates could increase sooner than expected. The dollar reached a four-week high against a basket of 10 major currencies today.

“The Fed and the dollar may be dominating, dampening the overall impact on gold prices” after yesterday’s events, Georgette Boele, a precious-metals analyst at ABN Amro Group NV in Amsterdam, said by phone today. The geopolitical situation “should give support. People will watch what’s happening.”

Gold for August delivery fell 0.4 percent to $1,311 an ounce by 7:46 a.m. on the Comex in New York. Prices declined 2 percent this week. Bullion for immediate delivery slipped 0.6 percent to $1,310.77 in London, according to Bloomberg generic pricing.

Trading Volume

Futures trading volume was about the average for the past 100 days for this time of day, data compiled by Bloomberg show.

A report may today show a measure of U.S. consumer confidence climbed this month, supporting the case for an interest-rate increase from the Fed. The U.S. central bank may have to raise rates more quickly than planned as unemployment falls and inflation quickens, St. Louis Fed President James Bullard said yesterday in Owensboro, Kentucky.

Silver for September delivery fell 0.8 percent to $20.975 an ounce in New York. Platinum for October delivery dropped 0.6 percent to $1,495.30 an ounce. Palladium for September delivery slid 0.9 percent to $877.45 an ounce, after touching $890 yesterday, the highest since February 2001.

The advance yesterday took the 14-day relative-strength index above the level of 70, a sign to some traders who study charts that prices were poised to retreat. It was at 64 today.

The metal is set for a fifth weekly advance amid signs of increased usage in cars after a South African mine strike that ended in June cut output. The U.S. and European Union imposed further sanctions this week on Russian businesses to pressure the country to halt interference in Ukraine. Russia is the largest supplier of palladium.

“Palladium has been helped this week by the adoption of further sanctions against Russia, but its grind higher has been quite orderly,” UBS AG wrote in a report today. “Yesterday’s tragedy, and the uncertainty surrounding the cause, will likely create fresh concern that further sanctions are possible. On the margin this should help palladium, but we argue that this (contained) risk is already built into the price.”

Source: Bloomberg