US gold futures ended slightly lower in choppy trade on Tuesday, following strong gains from the previous session, as a higher dollar and tumbling oil prices prompted investors to sell the precious metal.
Benchmark gold for February delivery on the Comex metals trading division of the New York Mercantile Exchange settled down $1.00 at $625.90 an ounce and traded in a range between $623.20 and $629.00 an ounce.
Estimated volume was 22,000 contracts, and options turnover was 11,000. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 40,215 contracts as of 2:41 pm EST (1941 GMT).
Gold seesawed and changed directions several times throughout Tuesday's session. Physical buying and a weaker dollar helped boost prices in early trading, but the yellow metal had later succumbed to plunging oil prices. "It's a combination of the oil market and the dollar strength today, which put a damper on the gold price," said Bruce Dunn at Auramet Trading. Dunn pegged the February contract's near-term price forecast at a range from $615 to $630 an ounce.
"I believe that the range would definitely remain choppy. The two components that you have to look at are the dollar versus the euro, and the oil prices," Dunn said. Oil prices plunged more than 4 percent to below $51 a barrel after Saudi Arabia said Opec production cuts were working well and there was no need for an emergency meeting of the producer group.
The price of crude oil has fallen over 16 percent since the end of last year, in part due to warm weather in the US Northeast, the world's top heating oil market. "A choppy session has been seen in the US today with initial gains being capped and swiftly reversed by falling oil prices," James Moore, an analyst at TheBullionDesk.com, wrote in his daily commentary. "Indeed, it seems gold has regained its correlation with oil following Friday's rally," Moore added.
The dollar was up across the board against major currencies by mid-afternoon, hitting a 13-month high against the Japanese yen, after it slipped against the euro.
Gold is generally seen as a hedge against oil-led inflation, and it usually moves in the opposite direction of the dollar. Spot gold was quoted at $625.20/6.20, slightly lower than $625.60/6.60 an ounce in late trade on Friday. London's gold fix was $627.05.
In other precious metals, Comex March silver closed down 25.50 cents, or 2.0 percent, at $12.625 an ounce, traded between $12.610 and $13.035. Spot silver was down at $12.550/2.620, against $12.780/2.850 an ounce in late Friday trade. Silver was fixed in London at $12.840 an ounce.
NYMEX April platinum finished down $6.30 at $1,145.80 an ounce. Spot platinum fetched $1,135.00/1,141.00. Lonmin, the world's third biggest producer of platinum used in car exhaust systems and jewellery, said rebuilding a damaged furnace would slash its first-half metal sales by around 40 percent. NYMEX March palladium ended up 90 cents at $335.85 an ounce. Spot palladium was quoted at $326/329.00.
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