Gold dips as dollar strengthens
London (July 24) Gold turned lower on Wednesday, erasing its previous gains and ending its three-day rally after the US dollar index strengthened. The greenback added gains after US fundamentals showed better-than-expected results.
Gold futures fell 0.42% to $1,329.20 an ounce at 11:28am EDT, while silver declined 0.40% to $20.175 an ounce as of the same time.
At the same time, the US dollar index, measuring the relative strength of the greenback against a basket of six major currencies, added 0.20% to 82.105. The index remains still relatively low compared with the almost three-year high of 84.75 reached at the beginning of July. Precious metals usually react in the opposite direction to the index.
Upbeat US data
Earlier today, bullion gained somewhat after an upbeat German Purchasing Managers' Index (PMI) report, which was announced before the latest US manufacturing and home sales figures.
Markit Economics reported that US flash manufacturing PMI rose to 53.2 points in July from 51.9 recorded in the previous month, while analysts had estimated a reading of 52.6.
Sales of new homes rose 8.3% in June, to an annual rate of 497,000 units following a downwardly revised 1.3% increase to 459,000 in the previous month, the Department of Commerce said on Wednesday.
Economists indicated families had bought 1.7% more houses last month which would have lifted the annual sales rate to 484,000 units. The pace of purchases seen in June was the highest in five years.
Gold gains
Monday's rally sent gold futures for August 3.3% higher to $1,339.10 an ounce, the highest level since June 20, representing the metal's biggest one-day rally in more than a year. The settlement was also the highest for a most-active contract since June 19 of this year, according to FactSet data.
Gold's rise was enabled by a weaker US dollar after the Federal Reserve Chairman confirmed his stance in the preceding week in his semiannual testimony before US Congress, that the central bank will not start winding down its massive monetary stimulus in the foreseeable future as Federal Reserve officials still consider the US economic recovery unsatisfactory, mainly with regards to the relatively high unemployment rate.
