Gold Price Slips on Stronger Dollar, Weaker U.S. Import Prices
San Francisco (Nov 10) Gold prices edged lower Tuesday on pressure from a stronger dollar and after a report showed U.S. import prices fell in October.
The most actively traded gold futures contract, for December delivery, was recently down 60 cents, or 0.1%, at $ 1,087.50 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices have tumbled in recent weeks after Federal Reserve officials reiterated that a shift to higher interest rates remains a viable policy option this year, spurning investor hopes for a delay. Gold is expected to struggle once rates climb, as the precious metal doesn't pay interest and costs money to hold. The policy shift is also likely to boost the dollar and make dollar-denominated gold futures more expensive for buyers who use other currencies to fund their purchases.
On Tuesday, the dollar advanced against the euro and the yen, adding to the pressure on gold prices. The ICE Dollar Index was recently up 0.3% at 99.27.
Meanwhile, U.S. import prices fell 0.5% in October from the prior month, the Labor Department said. This was more than the 0.1% decline economists predicted.
"With the dollar trading close to its highs, it's definitely tamped down on any worries about inflation and that's pressuring gold," said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.
Some investors buy gold as a store of value on the belief it will protect their wealth better than paper currency in an environment of skyrocketing consumer prices. However, when inflation remains tame these traders tend to shed gold in favor of other assets.
Gold traders are also watching for news out of the Fed regarding a potential increase in U.S. interest rates. Fed Chairwoman Janet Yellen is due to speak on Thursday at a conference on monetary policy, with traders hoping to glean fresh insight on the likely path of U.S. monetary policy.
"All in all, there seems to be little reason to buy gold at the moment," said David Govett, head of precious metals at Marex Spectron, in a note to clients.
Fed funds futures, used by investors and traders to place bets on central-bank policy, on Tuesday predicted a 68% likelihood of an interest-rate increase at the Fed's December policy meeting, up from likelihood of 6.9% a month earlier, according to data from CME Group.
Source: NASDAQ
