Gold fell on Thursday to its lowest since mid-January as a strong dollar weighed on price, with the market having unwound all of the premium built up on expectations for a third round of quantitative easing in the United States. Spot gold was down 0.8 percent at $1,636.94 an ounce at 1524 GMT.
The metal earlier hit a low of $1,627.68 - its weakest since January 13 - extending losses seen when the Federal Reserve upgraded its US economic outlook and fuelled the idea it would no longer inject liquidity into the system. US gold futures were down $18.70 at $1,631.50. Losses in spot silver outpaced those in gold, with the metal shedding 2.09 percent to $31.45 an ounce.
The dollar rose against the euro as US data showed unemployment benefits dropped to a four-year low in the latest week, offering evidence the jobs market recovery was gaining traction. The euro fell on Thursday after weak euro zone data revived concerns about a recession in the region, and the Australian dollar slumped on data showing a contraction in Chinese manufacturing.
A stronger US currency can make dollar-priced gold less attractive to non-US investors. The single currency was also hit by unexpected declines in euro zone manufacturing and services activity in March, dented in particular by a sharp fall in French and German factory activity.
Analysts expected that with a reassessment of global economic health, including slightly improved US data, gold prices might give way further. "It pretty much looks like it could go down further until we get any price-supportive news, and at the moment I can't see any so we should prepare for lower gold prices," Commerzbank analyst Daniel Briesemann said.
"I think we will get some considerable buying interest in terms of bargain hunting around the current level, probably between $1600 and $1650, so I don't expect gold prices to fall significantly below $1600." Key to the change in sentiment for bullion was a recent shift in sentiment towards US monetary loosening, with a third round of quantitative easing seen as off the cards for now.
"All the people who piled in back in January when the Fed went very public on low interest rates ... that has all been unwound now," said Simon Weeks, he ad of precious metals at Scotia Mocatta. Stock markets were struggling, with MSCI's main world equity index down 0.8 percent. Asia's physical market was muted, with interest sparse, traders said. Weak Chinese manufacturing activity, showing the overall rate of contraction accelerating and new orders sinking to a four-month low, also fanned concerns about China's retail gold appetite. "People are concerned about China's economic growth. If growth slows down and inflation eases, people may choose not to buy gold," said a Hong Kong-based gold dealer.
In India, the world's largest gold consumer, jewellers have been closed since the weekend in protest against an import duty increase on bullion. The recent economic optimism helped platinum regain its premium over gold earlier in the month. But the spread flipped to a discount again this week, with gold standing roughly $19 above platinum. Spot platinum traded down 1.16 percent at $1,614.49 an ounce, and spot palladium dropped 4.09 percent to $652.72.
Comments
Comments are closed.