Gold price drops 1% on firmer dollar, hopes of economic recovery

London (May 21) - Gold slipped 1% on Thursday, pulling away from this week's 7-1/2 year peak as the dollar strengthened and hopes of a quick economic recovery dented bullion's safe-haven appeal.

Spot gold was down 0.9% at $1,733.90 per ounce at 1106 GMT. U.S. gold futures fell 1% to $1,735.70 per ounce. The dollar index , which compares the greenback against a basket of rivals, rose 0.3%, making gold more expensive for holders of other currencies.

"Gold seems to have lost a little momentum since breaking above $1,750, and the rise in the dollar today doesn't seem to be helping," OANDA analyst Craig Erlam said. "However, the enormous amount of monetary stimulus in the system, the need for that to continue for some time and the inflation risk are all bullish for gold in the longer term."

Gold prices climbed to their highest since October 2012 at $1,764.55 earlier this week, mainly driven by massive monetary and fiscal stimulus, recession fears, and U.S.-China tensions. U.S. Federal Reserve policymakers acknowledged the possibility of further support measures if the economic downturn persists, the minutes from their latest policy meeting showed.

Focus now shifts to initial U.S. jobless claims data due later in the day for further clues about the health of the world's top economy. The devastating impact of the coronavirus pandemic on the euro zone economy has abated a little this month as some governments eased lockdowns, a survey showed.

"The yellow metal remains locked within a $40 range ($1,760-$1,720) and should continue to find solid interest toward the lower end over the near term," MKS PAMP said in a note.

Among other precious metals, palladium dropped 1.3% to $2,073.50 an ounce after hitting a one-month high on Wednesday. Platinum shed 1.6% to $836.83. Silver dipped 1.9% to $17.17 an ounce.

Reuters