Strengthening of Dollar Sends Gold Prices Falling

Los Angeles (Sept 8)  Gold prices fell Monday, as a strengthening dollar led investors to sell the precious metal.

Gold for December delivery, the most actively traded contract, was recently down $8.20, or 0.6%, to $1,259.10 a troy ounce on the Comex division of the New York Mercantile Exchange. In early trade, prices fell to $1,257 an ounce, the lowest since June 10.

Prices for gold have been under pressure from a burgeoning dollar, with investors flocking to the U.S. currency as the economic recovery gains momentum and on expectations of higher interest rates sometime next year. A rising greenback is bad news for gold, an asset many investors buy to offset the risk of dollar weakness. In addition, higher interest rates make gold a less attractive investment, as the metal costs money to hold and struggles to compete with investments that offer yield during times of tightening monetary policy.

On Monday, the dollar was up 0.3% against the yen at Y105.43, approaching a six-year high reached last week. The British pound was down 1% against the U.S. currency at $1.61. Gold prices are down nearly 5% from July highs.

"The stronger dollar and weak U.S. inflation are keeping investors on the sidelines," said James Cordier, a principal at Liberty Trading Group. "The landscape for gold is not bullish at all."

Silver followed gold lower, with the December contract falling 0.5% to $19.07 a troy ounce. Platinum prices slipped 0.7% to $1,401.70 a troy ounce, their lowest level since April. Palladium prices fell 0.8% to $884.45 a troy ounce.

Source: WSJ