Gold futures sank to the lowest price in over a month due to multi-week rally in the dollar, but market uncertainty over US monetary policy is also playing a major role.
Gold for June delivery on the Comex division of the New York Mercantile Exchange tumbled $13.00 or one percent to $1,238.50 per ounce. Earlier, the price fell to $1,228.0, the lowest point since April 21.
In the last few weeks, the dollar has staged a major comeback after tumbling to the lowest point since October 2015. The dollar index was last trading at 95.61, the highest point since late March and the eleventh positive session in the last 16 days.
“Metals continue to struggle against the grinding stronger dollar as traders are desperately looking for clarity on rate hikes,” Peter Hug, Kitco Metals Global Trading Director, said. “Our short-term target of $1,230 remains in place. Upside momentum may be hampered as investors may sell into rallies.”
The dollar rally has been partially fueled by the hawkish Federal Open Market Committee (FOMC) April meeting minutes. A majority of policy-board members are growing more comfortable with a summer interest rate hike after the global equity calamity at the beginning of the year subsided.
Market participants currently see a 34-percent chance of a June rise, with 57 percent expecting it in July, according to CME Group FedWatch.
Throughout the week, investors will be observing various Fed official speeches, but the greater focus will be on Fed chair Janet Yellen, who is scheduled to appear at Harvard on Friday, along with former chairman Ben Bernanke.
Nevertheless, investors remain drawn to the precious metal with exchange-traded-funds tracked by FastMarkets seeing 4.2 tonnes of inflows overnight.
“All in all, we continue to be positive on the outlook for gold prices,” Georgette Boele, precious metals strategist at ABN AMRO, said. “For a start, we think that the multi-year US dollar rally has come to an end and the recent recovery is just temporary in our view.
“Moreover, we expect US real yields (taking into account inflation expectations) to peak and to move lower,” she added.
In data today, US new home sales for April came in at 619,000, above the forecast of 521,000. The Richmond manufacturing index for May stood at -1, a stark divergence from 9 figure that was estimated.
“An eight-year high in new home sales suggest the U.S. housing market is returning to more solid footing as we head further into the second quarter,” Lindsey M. Piegza, Chief Economist at Stifel, said.
“Aided by continued positive gains in employment, low energy costs, favorable lending conditions, and a relatively stable confidence level, housing activity accelerated in April. Despite earlier signs of stagnant momentum, the spring selling season appears to be kicking off with a more than decent level of consumer activity,” Piegza added.
Turning to US markets, the Dow Jones industrial average and S&P were up 1.2 percent and 1.4 percent respectively, while the dollar strengthened 0.7 percent to $1.1147 against the euro.
As for other precious metals, Comex silver for July settlement slipped 15.3 cents or 0.9 percent to $16.270 per ounce. Trade has ranged from $16.250 to $16.455.
Platinum for July delivery dipped $8.50 or 0.8 percent to $1,004.60 per ounce, while the most-actively traded palladium contract came in at $537.60 per ounce, down $12.65 or 2.3 percent.
(Editing by Tom Jennemann)
The post Gold slips to 5-wk low amid dollar rally appeared first on The Bullion Desk.
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Source: Bullion Desk News
