Gold Price Falls as Dollar Climbs and Traders Take Profits

New York (Apr 7)  Gold prices pulled back from a seven-week high Tuesday as some traders locked in gains on the rally while others were put off by a stronger dollar.

The most active contract, for June delivery, was recently down $7, or 0.6%, at $1,211.60 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold prices surged to $1,218.60 a troy ounce on Monday, when traders had their first chance to react to weaker-than-expected U.S. employment data released on Friday. Comex gold trading had been shut in observance of the Good Friday holiday.

”It was purely the reaction to the jobs data, because the market wasn’t open on Friday to react to it,” said Dave Meger, director of metals trading with High Ridge Futures in Chicago.

Signs that U.S. jobs growth is slowing supports hopes that the Federal Reserve might put off raising interest rates, a move widely expected in the second half of this year. Any delay is good news for gold, which struggles to compete with yield-bearing investments when rates climb.

A firmer dollar, which had gained ground against the euro and the yen, also put pressure on gold prices. The Wall Street Journal Dollar Index, which tracks a basket of international currencies against the dollar, was recently up 0.4% at 87.21.

Gold is traded in dollars and becomes more expensive for foreign buyers when the dollar strengthens against their home currencies.

Source: WSJ