Gold falls on strong dollar, heads for fourth week of losses
London (Sept 26) Gold dropped on Friday, heading for its fourth weekly loss in a row, as investors remained wary that a strong dollar and rebounding shares could drive prices through an important support level at $1,200 an ounce.
Spot gold was down 0.7% at $1,214.95 an ounce by 2.31pm GMT, while US gold futures lost $7.40 to $1,214.50 an ounce.
The metal fell to a nine-month low of $1,206.85 on Thursday, before rebounding due to a sharp selloff in US equities, which prompted investors to seek refuge in perceived safer assets such as bullion.
"Today we are seeing the dollar and stock markets pressuring precious metals," MKS SA senior vice president Bernard Sin said.
"The market is getting a little bit nervous because we are floating just above this psychological level of $1,200 and it is important that we don’t close below it today because a lot of stop losses would be triggered there." European shares rebounded from a one-month low hit earlier on Friday, while US stocks rose as data showed the country’s economy grew at its fastest pace in more than two years in the second quarter.
The Commerce Department raised its estimate of gross domestic product to show the economy expanded at a 4.6 percent annual rate, in line with expectations and the best performance since the fourth quarter of 2011.
Strong data lifted the dollar against a basket of major currencies, putting the US unit on track for an eleventh week of gains.
"Gold could fall below $1,200, but I maintain a cautious optimism that it won’t break below the $1,180 area," Saxo Bank manager Ole Hansen said.
"The dollar has been strengthening on the weak economic outlook for Europe and relatively hawkish expectations for interest rates in the US, and in that sense the jobs report next week is really important." The bigger impact on gold prices could still come from economic data, with US September nonfarm payrolls figures due on October 3. Markets are eyeing more US releases to gauge the strength of the economy and its impact on Federal Reserve policy.
Strong economic figures could prompt the US central bank to raise interest rates faster and sooner than expected, which could hurt non-interest-bearing bullion and boost the dollar further.
Physical buying in Asia, the top gold-consuming region, has increased in recent days as prices have slid towards January’s lows, but the pickup has not been robust, because many expect further price drops.
India should soon see a demand boost with the beginning of the wedding and festival season. China could also see an uptick as it goes on a week-long holiday from October 1.
Among other precious metals, silver rose 0.2% to $17.51 an ounce.
Platinum fell 0.4% to $1,300.49 an ounce, not far from its lowest since June 2013 at $1,295.25 hit on Thursday. Palladium was down 1.1% at $791.47 an ounce, having fallen to its lowest since late April at $786.