Gold drops to two-month low

London (Sept 3)  Gold prices fell to a two-month low and palladium posted its steepest decline in two months overnight, as pressure from a stronger US dollar snuffed out investor appetite for the haven assets.

Gold for December delivery, the most actively traded contract, fell $US22.40, or 1.7 per cent, to $US1,265 a troy ounce, the lowest closing price since June 11 on the Comex division of the New York Mercantile Exchange.

The dollar gained on investors' expectations of stimulus efforts by the European Central Bank after its chief Mario Draghi signalled that further accommodative steps are necessary to revive the region's economy. The ICE dollar index, which tracks the greenback against a basket of currencies, rose to 83.03, its highest level in more than a year.

"The prospect for the ECB to be easing means a weaker euro and it lends the dollar strength," Frank Lesh, a broker and futures analyst with FuturePath Trading, said.

The greenback's strength made dollar-denominated gold more expensive for buyers who use other currencies to fund their purchases. December gold fell as low as $US1,263.10 an ounce on Tuesday.

The shift in currency markets comes as the US nears the end of its stimulus efforts and moves closer toward raising interest rates, developments that are likely to further boost the dollar, according to Adam Klopfenstein, a senior market strategist with Archer Financial Services in Chicago.

"The US is doing better than its peers, whereas in Europe they're just beginning on this path of stimulus," he said.

Palladium futures pulled back from a 13-year high as some investors locked in gains on the recent rally while others saw the stronger dollar as a threat to further gains.

Source:  HeraldSun