Comex gold futures finished with notable declines dating back nearly six weeks, losses that were triggered by a surge in the dollar once US consumer confidence data came out well above forecasts, traders said on Tuesday.
"The (gold) market has been range-bound between $390 and $395 (an ounce) the past couple of days, and what caused today's downward move was the strong economic data. Once the confidence data came out gold cracked the $390 support level.
There was some good fund selling below $390 today. There was stop loss selling," said one New York gold dealer. August gold closed $3.30 lower at $387.0 an ounce on the New York Mercantile Exchanges Comex division.
It set a fresh low dating back to June 17 at $386.30. The high at $393.80 was similar to Monday's peak. A definitive break of a key level like $390 an ounce causes a bigger move than usual.
But, traders said because business has been somewhat thin with summertime vacations the downdraft was accelerated on Tuesday. Some traders said they were not yet convinced that the upturned was over, but they said it would likely have to struggle to climb back above several resistance levels at $390 and the psychological level of $395 an ounce on August futures.
On Tuesday, the dollar vaulted to five-week highs against the euro after a report on US consumer confidence registered much stronger than expected increases. The Conference Boards July reading on confidence jumped to 106.1, overshooting forecasts for 102.0.
The euro fell to session lows around $1.2112 on the report. The confidence measure fuelled expectations that the Federal Reserve could raise interest rates faster than had been expected.
Gold was toppled last week when the dollar launched a major advance against the euro on Fed Chairman Alan Greenspans upbeat remarks to Congress indicated that a tighter monetary policy posed less of a risk to the US economy than would leaving rates too low for too long.
More long gold positions were unloaded on Tuesday when expectations of higher interest rates were reinforced by the data.
Higher US rates offer a favourable interest rate differential to the dollar. But, dollar-denominated assets like gold suffer in the overseas market when the dollar rises. Many gold traders had stayed out of the market since on Friday's steep sell-off.
The August contract fell $8 as long-term gold holders watched the upturned unwind that had been building since June. Aside from the economic data, Comex floor brokers said most of their orders were devoted to rollovers out of August futures into December.First notice day for the benchmark August gold contract on Friday. Players still holding long copper positions are expected to roll them forward all week. Comex estimated final gold turnover at 120,000 lots, more than the 110,449 count on Monday. Open interest fell by 9,537 contracts to 229,139 on Monday. Spot gold declined to $386.80/7.30 an ounce by late Tuesday, down from $390.25/1.00 on Monday. On Tuesdays afternoon fix in London was $389.85.
Comex September silver ended up 20 cents at $6.2420 an ounce, in a range from $6.16 to $6.30. Spot silver changed hands at $6.22/24 at Tuesdays close, off on Mondays finish at $6.20/23 an ounce.
On Tuesdays London fix was $6.24. Nymex October platinum lost $8.20 to close at $803.20 an ounce, and traded between $802.50 and $811.60. Spot platinum was lower at $804.50/809.50.
September palladium dipped 60 cents to settle at $219.40 per ounce, in a $218.50 to $223.50 range. Spot palladium was quoted even at $217/222 an ounce.
Comments
Comments are closed.