Gold Price Falls on Pressure From Dollar’s Rally, Upbeat US Data
San Francisco (July 1) Gold prices fell Wednesday as upbeat U.S. economic data fueled a rally in the dollar and refocused investor attention on the likelihood of the Federal Reserve raising interest rates.
The most actively traded contract, for August delivery, was recently down $1.40, or 0.1%, at $1,170.40 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices are on track to settle at the lowest since June 5.
Investors have been cutting back their gold holdings for months in anticipation of tighter monetary policy in the U.S. Broad gains in U.S. job creation in recent months, as well as a fragile recovery in housing and signs that other economic sectors are grinding higher, are paving the way for the Federal Reserve to raise rates. This is bad news for gold, which doesn’t pay interest or dividends and would struggle to compete with bonds and stocks that do when rates climb.
On Wednesday, a stronger dollar pushed gold prices to retreat. The WSJ Dollar Index was recently up 0.5% at 87.01. Gold is priced in dollars and becomes more expensive to investors who use other currencies to fund their purchases when the buck rallies.
Private payrolls in the U.S. increased by 237,000 jobs in June, according to a national employment report by payroll processor Automatic Data Processing and forecasting firm Moody’s Analytics. Economists had forecast a gain of 220,000 jobs for June. Meanwhile, U.S. manufacturing activity rose to 53.5 in June, from 52.8 in May, according to the Institute for Supply Management’s purchasing managers index.
The upbeat data spurred selling by some investors, who worry that the Fed will raise interest rates in September, said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. “Precious metals markets are looking ahead at U.S. data and Fed decisions,” Mr. Haberkorn said.
Some traders are also bracing for U.S. nonfarm payrolls data, due Thursday. That employment report, closely watched by Fed officials, is expected to show U.S. employers added 233,000 jobs.
Elsewhere, palladium futures rallied in response to upbeat U.S. car sales data. U.S. auto sales have been pushing higher and are on track to deliver one of the strongest years ever. This week, the National Automobile Dealers Association raised its 2015 U.S. auto-sales forecast to 17.2 million vehicles from its earlier forecast of 16.94 million.
Palladium is primarily used in car exhaust filters for gasoline-burning vehicles, the dominant technology in the U.S. auto market. Nymex palladium for September delivery was recently up 3.7% at $697.55 a troy ounce.
Source:WSJ
