Gold price slips after best day since April as dollar strengthens
London (May 12) Gold fell back below $1,270 an ounce on Thursday as a strengthening dollar prompted some buyers to cash in gains after the metal posted its biggest daily rise this month in the previous session.
Prices remained supported, however, by expectations the
Federal Reserve will hold off raising interest rates at its June
meeting, after hiking them for the first time in nearly a decade
The metal has risen nearly 20 percent this year as
expectations for a near-term rate rise evaporated. Rising rates
increase the opportunity cost of holding non-yielding gold.
Spot gold was down 0.7 percent at $1,268.46 an ounce
at 1130 GMT, while U.S. gold futures for June delivery
were down $5.60 at $1,269.90. The metal hit a 15-month high last
week at $1,303.60, before slipping back below $1,300.
"The weakness in gold which we're experiencing today is
mainly due to the strength in the dollar, and also we're
approaching close to a very important level of $1,300," Naeem
Aslam, chief market analyst at Think Forex, said.
The dollar index rose 0.25 percent on Thursday,
lifted by a drop in the yen as investors sold the currency amid
speculation the Bank of Japan could decide to expand its
monetary stimulus as soon as next month.
Underlining optimism towards the metal, however, holdings of
the world's largest gold-backed exchange-traded fund, SPDR Gold
Shares, rose 2.7 tonnes to 841.9 tonnes on Wednesday, the
highest since December 2013.
Surging inflows into gold-backed exchange-traded funds drove
global gold demand to its highest first-quarter total on record
this year at 1,290 tonnes, the World Gold Council (WGC) said,
despite a near 20 percent drop in jewellery demand.
"While we hardly expect to see a repeat of the strong
investment demand of the first quarter, jewellery demand, which
is generally regarded as more stable, should pick up again,
meaning that the gold price should be well supported in the
medium term," Commerzbank said in a note.
Demand in India, the world's second-biggest gold consumer,
could rise as much as 10 percent in 2016 on good monsoon
rainfall, the WGC added, despite consumer demand falling nearly
40 percent in the first quarter.
Spot silver was down 0.8 percent at $17.26 an ounce,
platinum fell 0.7 percent to $1,055.20, and palladium
was down 0.6 percent at $600.96.
GFMS analysts at Thomson Reuters said in a report on
Thursday that platinum prices were likely to have already posted
their lows for the year, with a return to supply shortfalls set
to hold the metal at an average $1,005 an ounce in 2016. It hit
a seven-year low of $806.31 an ounce in January.