Gold price slides with other commodities as dollar and equities rise
San Francisco (May 9) Gold fell more than 1 percent on Monday as the strengthening dollar and a sharper appetite for assets seen as higher risk sparked selling across commodities.
The metal's failure to break back above $1,300 in the wake of a weaker than expected U.S. jobs report on Friday is also leading some investors to cash in gold gains.
Spot gold was down 1.8 percent at $1,264.76 an ounce, erasing the 0.8 percent gain made on Friday after weak non-farm payrolls data. U.S. gold futures for June also came under pressure, dropping 2 percent to $1,266.80.
Gold snapped four days of losses when the payrolls report showed that the U.S. economy added the fewest jobs in seven months in April, leaving some economists expecting only one interest rate hike from the Federal Reserve this year.
But its failure to capitalize further on the data disappointed some gold bulls, given how far their bets on higher prices had gone. "Positioning has been stubbornly elevated so far this year, and as a result we hold the view that the market is going to continue consolidating within the range that has been established," UBS analyst Joni Teves said. "The bounce in the dollar has also contributed to (the pullback), and this period is seasonally slow for gold."
Hedge funds and money managers raised their net long positions in COMEX gold contracts again in the week to May 3, data showed on Friday.
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The dollar index, which hit a 16-month low last week, rose 0.2 percent on Monday, with the yen falling after Japan's finance minister said that Tokyo was ready to intervene in the currency market if needed.
Helping the dollar rebound, New York Federal Reserve President William Dudley said that two U.S. interest rate increases remain "reasonable expectation" for this year.
Rising rates tend to weigh on gold because they lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. Gold has rallied 20 percent this year as expectations for a near-term Fed hike faded.
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Sharper appetite for assets seen as higher risk also helped to lift European shares 0.8 percent. "Gold prices are solidly lower in early U.S. trading Monday, pressured by some profit-taking from recent gains and by better risk appetite in the general marketplace," Kitco Metals said in a note.
Silver was down 2.7 percent at $16.98 an ounce and platinum lost 3 percent to $1,043.50.