Gold Ends Lower Amid Looming China Holidays, Rate Hike Worries
Washington (Feb 17) Gold futures dropped sharply to end at a six-week low Tuesday, with investors anticipating some low physical demand with the Chinese New Year looming ahead and the Fed seen moving toward tightening rates mid-year. The sharp drop comes despite continued concerns over the Greek bailout fund extension failure and a weak dollar.
The precious metal was also impacted after yet another Federal Reserve member hinted of a US interest rate hike as early as June.
Cleveland Fed President Loretta Mester said she wants the Fed to drop its pledge to be "patient" before making a move. In an interview with the Wall Street Journal , Mester said she wanted June to be a "viable option," and would like to see the "language change."
Meanwhile, the Greek story seem to be heading for a tragedy as the eurozone finance ministers meet on Monday failed to produce any breakthrough, with the beleaguered EU member refusing to seek an extension to its current bailout program that expires February 28 .
Gold futures have dropped more than USD100 since hitting a multi-month peak near USD1315 in January.
Gold for April delivery, the most actively traded contract, dropped USD18.50 or 1.5% to settle at USD1,208.60 an ounce, on the Comex division of the New York Mercantile Exchange on Tuesday.
Gold for April delivery scaled an intraday high of USD1,236.70 and a low of USD1,203.30 an ounce.
On Friday, gold ended at USD1,227.10 an ounce, up USD6.40 or 0.5%, as the dollar weakened on some soft economic data from the US following the disappointing US retail sales and unemployment claims data earlier in the week.
Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, edged down to 768.26 tons on Tuesday, from its previous close of 771.51 tons.
The dollar index, which tracks the US unit against six major currencies, traded at 94.13 on Tuesday, down from its previous close of 94.43 in North American trade. The dollar scaled a high of 94.51 intraday and a low of 93.80.
The euro trended higher against the dollar at USD1.1399 on Tuesday, as compared to its previous close of USD1.1356 in North American trade. The euro scaled a high of USD1.1450 intraday and a low of USD1.1328 .
In economic news from the US, business activity among New York manufacturers continued to expand modestly in February, a Federal Reserve Bank of New York report said Tuesday, although the index of activity in the sector fell more than expected. The New York Fed's headline general business conditions index dipped to 7.8 in February from 10.0 in January. Economists had expected the index to edge down to 9.5.
A National Association of Home Builders report on Tuesday showed an unexpected deterioration in US homebuilder confidence in February, reflecting the unusually high snowfall across much of the country. The NAHB/Wells Fargo Housing Market Index dropped to 55 in February after dipping to 57 in January. Economists expected the index to inch up to a reading of 58.
German economic confidence rose for the fourth consecutive month to a one-year high in February, despite the continuing uncertainty over future Greek funding plan, a closely watched survey showed Tuesday. The economic sentiment index rose to 53 from 48.4 in January, the Mannheim-based Centre for European Economic Research , or ZEW said. This was the highest score since last February, when the reading was 55.7. But the score was below the expected level of 55.
British inflation eased more than expected to a record low in January on falling motor fuel and food prices, vindicating the assessment that it is moving into negative zone. Output prices also logged its biggest fall on record. Inflation dropped to 0.3% in January from 0.5% in December, the Office for National Statistics reported Tuesday. It was forecast to slow to 0.4%. This was the lowest since records began in 1989.
House prices in the UK rose at the slowest pace in eight months during December, data from the Office for National Statistics showed Tuesday. The house price index climbed 9.8% annually in December after a 9.9% rise in the previous month. Economists expected a 9.5% increase.
Source: RTTnews
