Gold Price Ends Lower As Dollar Strengthens
San Francisco (Sept 22) Gold futures ended lower for a second straight session on Tuesday, with the dollar trended higher and in anticipation of a rate hike by the Federal Reserve some time this year.
Global equity markets tumbled after commodity prices plummeted on a strengthening dollar, with crude oil prices leading the plunge. A weaker dollar tends to encourage buying in dollar-priced commodities as it makes them cheaper to holders of other currencies.
Weakness in the Chinese economy also translated to waning demand for the precious metal.
Gold prices found little support as the Federal Reserve's statement last week did little to clarify the outlook on interest rates, although a rate hike later this year seem imminent.
Markets are in limbo after the Fed said it was on track to raise rates this year, despite the skepticism over the health of the global economy.
U.S. stock markets were in a steep decline with the major averages stuck firmly in the red. The Dow is currently down 1.6 percent, the Nasdaq is down 2.2 percent, and the S&P 500 is trending lower by 1.8 percent.
Gold for December delivery, the most actively traded contract, fell $8.00 or 0.7 percent, to settle at $1,124.80 an ounce, on the Comex division of the New York Mercantile Exchange on Tuesday.
Gold for December delivery scaled an intraday high of $1, 136.10 and a low of $1,120.50 an ounce.
On Monday, gold prices for December delivery dropped $5.00 or 0.4 percent, to settle at $1,132.80 an ounce, as investors opted for the more riskier equity assets with most global stock markets in the U.S. and Europe ticking higher.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, declined to 674.61 tons on Tuesday from its previous close of 678.18 tons.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 96.33 on Tuesday, up from its previous close of 95.93 in late North American trade on Monday. The dollar scaled a high of 96.40 intraday and a low of 95.76.
The euro trended lower against the dollar at 1.1124 on Tuesday, as compared to its previous close of 1.1190 in North American trade late Monday. The euro scaled a high of 1.1209 intraday and a low of 1.1114.
On the economic front, a leading economic index for the Chinese economy advanced sharply in August, the latest survey from the Conference Board showed on Tuesday. The index advanced 1.0 percent, following the 0.9 percent increase in July and the 0.5 percent gain in June.
Germany's real wages grew at its fastest pace on record in the second quarter, data from Destatis revealed Tuesday. Real wages advanced 2.7 percent in the second quarter from last year, and was the fastest growth since the series began in 2008. Wages increased 2.5 percent in the first quarter.
U.K. budget balance showed its biggest shortfall for August in three years as tax revenue declined from last year, data from the Office for National Statistics showed Tuesday. Public sector net borrowing excluding public sector banks increased by GBP 1.4 billion from last year to GBP 12.1 billion in August.
This was the largest deficit for August since 2012. Economists had forecast the deficit to widen to GBP 9.2 billion.