Gold Falls on Dollar Strength and Firmer Equities
New York (Mar 30) Gold prices fell Monday as the dollar advanced against other currencies and as a rally in stocks prompted some investors to sell the precious metal.
The most actively traded gold contract, for June delivery, fell $15.40, or 1.3%, to $1,185.30 a troy ounce on the Comex division of the New York Mercantile Exchange. It was the lowest settlement since March 20.
Gold retreated further from $1,200 an ounce as the dollar climbed against other currencies. The dollar advanced against the euro and the Japanese yen, with The Wall Street Journal Dollar Index recently up 0.5% at 87.54.
Dollar-denominated gold becomes more expensive for foreign buyers when the greenback strengthens against their home currency.
Gold prices had rebounded above $1,200 an ounce in recent days, after a surprisingly dovish Federal Reserve monetary-policy statement tapped the brakes on the dollar’s historic rally. But as the dollar resumes its march higher, some analysts say gold is quickly losing its appeal.
“It would appear that the downtrend for gold remains intact,” Andrew Wilkinson, chief market analyst with Interactive Brokers LLC, said in a note to clients.
Gains in global equity markets also turned up the pressure on haven bets like gold and U.S. Treasury bonds. Some investors buy gold as a store of value but lose their appetite for haven assets when riskier bets like company shares rally, preferring to chase the chance of larger returns.
“You just don’t have anyone believing that holding gold is going to be rewarding at the moment,” said Frank Lesh, a broker and futures analyst with FuturePath Trading LLC in Chicago.
For gold traders, the focus is now on economic data, particularly employment, as that is a key input into the Fed’s decisions on interest rates.
Gold traders are looking ahead to the U.S. jobs report, due Friday, for clues about the path of U.S. monetary policy. Federal Reserve Chairwoman Janet Yellen said last week that interest rates are still likely to rise this year, giving a boost to the dollar and turning up pressure on gold, said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.
“Is it a good report? Does it add fuel to the fire that we’re getting a rate increase sooner?” Mr. Haberkorn said.
Palladium prices extended their losses to a 13-month low after dipping into bear-market territory during the session. Nymex June palladium ended down 1.6% at $729 a troy ounce. If prices had closed at or below $727.64 an ounce, palladium futures would be in a bear market, roughly defined as a drop of 20% from a recent peak. Palladium has been in a bull market since 2012.