Selling based on technical-chart indicators and contract rollover drove US gold futures lower early on Wednesday for a second straight day, and analysts said further declines were possible in the short term.
At 10:25 am EDT (1425 GMT), most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange was down $4.00 at $673.30 an ounce, trading from $670.00 to $677.90. George Gero, vice president of RBC Capital Markets Global Futures, said that investors were taking a breather as sell-stops pushed prices down to the $670 level.
"The rollover is going to begin, and you have got a very large June position," said Gero, referring to investors' switching of the benchmark June contract to August futures. Contract rollover added volatility to the market because of the interaction of different trading strategies as investors mulled whether to switch their futures to the next most-active month as the first-notice day approaches.
Gero said that the trend on technical charts had been deteriorating since a week ago, adding selling pressure to the market. "You are getting further and further away from that $700 target," he said.
On Tuesday, gold futures finished about 1 percent lower due to selling by funds and a lack of buying interest. The dollar rose against the euro in morning trade. A higher greenback makes dollar-denominated assets like gold more expensive for investors holding other currencies.
UBS Investment Bank said in a research note that further short-term declines in gold could not be ruled out, as long as positioning in the futures markets remained high and that the dollar did not fall sharply after the euro hit a new high against the greenback.
"Any further evidence of better than expected US data could see the euro/dollar head lower and gold under pressure from more long liquidation," UBS said. Spot gold was quoted at $670.00/0.50 an ounce, lower than a late quote of $673.70/4.20 in New York on Tuesday. London's afternoon gold fix was $669.50.
In other precious metals, COMEX July silver was down 7.00 cents to $13.300 an ounce, trading from $13.130 to $13.480. Spot silver was quoted at $13.18/3.22, compared with $13.24/3.27 late Tuesday. Silver was fixed at $13.180 in London. July platinum was down $3.40 to $1,297.80 an ounce. Spot platinum was quoted at $1,285.00/1,289.00. June palladium edged down 45 cents at $373.70 an ounce. Spot palladium fetched $368.00/372.00.
Comments
Comments are closed.