Gold down 1% to near 2-week low on strong dollar

13 May

Gold fell more than 1 percent on Monday, holding near its weakest level in two weeks, as the dollar firmed against other currencies on signs of an improving US job market and as holdings in exchange-traded funds slipped again.

US labour market data has pointed to a steady recovery trend in the world’s largest economy, fuelling speculation the Federal Reserve could scale back its aggressive monetary stimulus aimed at supporting growth.

Gold fell USD 17.10 an ounce to USD 1,430.60 by 01.59 GMT, nearing Friday’s low of USD 1,420.61, its weakest since April 24. Gold has fallen more than 14 percent this year as investors switch funds into a rallying equity market and the dollar.

“So far, nothing in the market bodes well for an upside in gold. Gold needs to break above USD 1,487 to show an upward correction,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

“CFTC data shows an increase in bearish bets in gold, so that sends another bearish signal to retail speculators, who have no idea what the funds’ view on gold is. There’s probably some technical selling because we’ve broken below USD 1,440.”

US gold was at USD 1,429.80 an ounce, down USD 6.80. Hedge funds and money managers trimmed their bullish bets in gold futures and options in the week to May 7 on weaker bullion prices and outflows in gold exchange-traded funds, a report by the Commodity Futures Trading Commission (CFTC) showed on Friday.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), said its holdings fell 0.24 percent to 1051.65 tonnes on Friday after they rose slightly on Thursday. The holdings were within sight of a four-year low.

Cash and US gold futures plunged to around USD 1,321 on April 16, their lowest in over two years, after worries about central bank sales and a drop below USD 1,500 led to a sell-off that stunned investors, prompting them to slash ETF holdings

Asian shares eased on Monday with sentiment hit by selling in commodities due to a strong dollar, which rose to a fresh 4-1/2-year peak against the yen on the back of growing confidence in the US economy.

Bullion hit an 11-month high in October last year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank’s money-printing to buy assets would stoke inflation.

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