Gold Price Down, Hits 2-Week Low, as US Dollar Rallies
New York (May 26) Gold prices are sharply lower, have fallen below the key $1,200.00 level and hit a two-week low in early U.S. trading Tuesday. A surging U.S. dollar index is a major bearish weight for the precious metals early this week. Market place focus remains on the greenback, despite some developments that could be perceived as friendly for the safe-haven gold market. By 08:40am EST spot gold was last down $15 at $1,189 an ounce. Spot ilver was last down 32 cents at $16.76 an ounce.
Traders and investors in Europe and the U.S. are coming back from a long holiday weekend to news that Greece says it will run out of money before its next debt payment is due, unless a new deal is struck with its creditors soon. Greece and its lenders are negotiating new terms to extend Greece’s loan payments, but the lenders are demanding that Greece overhaul its economy. Reports say limited progress has been made in the talks. A European Central Bank official said uncertainty over the outcome of the Greek debt negotiations could destabilize the European Union’s financial markets. The Group of Seven industrial nations will meet in Germany at mid-week, to likely discuss the Greece matter, as well as other world economic and financial issues.
While the gold market is presently seeing little safe-haven demand from the Greece debt matter, that could change in a hurry if the situation with Greece and its debt burden deteriorates.
Meantime, the U.S. dollar has surged against its counterparts early this week, in part due to safe-haven demand due to the Greek debt crisis. The greenback hit an eight-year high against the Japanese yen Tuesday and hit a one-month high against the Euro currency. The U.S. dollar index hit a one-month high Tuesday, following a technically very bullish weekly high close last Friday that gave the index a fresh boost of power to suggest the index can continue to trend sideways to higher in the near term. That’s not good news for the raw commodity sector.
The U.S. dollar bulls got some more positive fundamental news in recent days when Federal Reserve officials sounded more hawkish on U.S. monetary policy. On Friday Federal Reserve Chair Janet Yellen said a U.S. interest rate hike “would be appropriate at some point this year.” And on Monday Fed Vice Chairman Stanley Fischer said the U.S. central bank will gradually raise interest rates in the next three or four years, to bring borrowing costs back to normal.
A hefty slate of U.S. economic data is due for release Tuesday, including durable goods orders, the S&P/Case-Shiller home price index, the U.S. monthly and quarterly house price indexes, the U.S. flash services purchasing managers’ index, new residential sales, the Richmond Fed business survey, the Texas manufacturing outlook survey, and the consumer confidence index.
Source: KitcoNews
