Stronger dollar curtails gains in gold price

London (May 13) Gold rose one percent on Friday as European equities fell, but further gains were curtailed by a stronger dollar, backed by anticipation of an improvement in the U.S. economy.

The dollar hit a two-week high against a basket of currencies on Friday, posting its best fortnightly performance since February, making dollar-denominated assets such as gold more costly for holders of other currencies.
    The U.S currency got a boost overnight after two U.S.
Federal Reserve officials said the central bank should raise
rates if data points to an improving
economy. 
    The market is awaiting U.S. retail sales at 1230 GMT for
clues on the strength of the economy.
    Spot gold rose to a session high of $1,276.20 an
ounce and was up 0.9 percent at $1,274 by 1002 GMT, after
dropping 1.1 percent on Thursday.
    However, it is still down 1 percent so far for the week, the
most since the week ended March 25.
    U.S. gold for June delivery rose 0.4 percent to
$1,276.80 an ounce.
    "The move (in the gold price) this year has really been down
to the shift in the U.S. policy expectations," Deutsche Bank
analyst Michael Hsueh said.
    "It's more about when we start to see any improvement in
U.S. data that could push the pendulum the other way and push
the dollar higher."
    Gold has gained 20 percent in 2016 after a series of weak
economic data in the United States and elsewhere eased
expectations of a near-term increase in U.S. interest rates.
    Higher interest rates would lift the opportunity cost of
holding non-yielding gold.
    Reflecting sustained optimism towards bullion, holdings of
SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, stood at 27.17 million ounces on Thursday,
the highest since November 2013.
    Technical analysts at ScotiaMocatta said their view on gold
is neutral so long as it trades between the $1,303 resistance
level and the $1,256 support.
    Spot silver advanced 0.6 percent to $17.09 an ounce,
platinum gained 0.7 percent to $1,055.80 and palladium
 climbed 0.4 percent to $595.33.

Source: Reuters