Gold drops toward $1,300 on dollar advance
SAN FRANCISCO (Nov 1) Gold futures dropped toward $1,300 an ounce on Friday, ready for a loss of more than 3% for the week as the U.S. dollar rallied against the euro on speculation that low euro-zone inflation may prompt the European Central Bank to lower interest rates.
Gold for December delivery /quotes/zigman/662680/realtime GCZ3 -0.85% dropped $16.70, or 1.3%, to $1,307 an ounce on the Comex division of the New York Mercantile Exchange. Tracking the most-active contracts, prices were poised for a loss of more than 3% for the week and a settlement at the lowest level since Oct. 16.
Prices fell nearly 2% on Thursday after the Federal Reserve maintained the pace of bond-buying, but kept tapering plans on the table. For the month of October, gold prices fell 0.3%.
December silver was down 2 cents, or 0.1%, at $21.85 an ounce Friday, trading down about 3.5% for the week after ending the month of October with a gain of 0.7%.
The U.S. dollar on Friday rallied against other major currencies, especially the euro, making dollar-denominated commodities such as gold more expensive for holders of other currencies.
The dollar “has been quite strong in recent sessions, and that has created some pressure on gold,” said Vedant Mimani, lead portfolio manager of the Atyant Capital Global Opportunities Fund.
The dollar index rose to 80.752 from 80.221 late Thursday, while the euro dropped to $1.3486 from $1.3587. Data Thursday showed inflation in the euro zone fell to the lowest level in almost four years in October, fueling speculation that the European Central Bank will cut interest rates.
The euro “has come under heavy liquidation as currency traders readjust their positions believing that the ECB will now become progressively more dovish as it tries to battle the deflationary forces in the region, while the Fed will turn to tightening as it considers a taper of [quantitative easing] early next year,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
Also Friday, gold prices fell even further after the Institute for Supply Management’s manufacturing index showed a climb to 56.4% in October. That was the highest reading since April 2011.
The ISM manufacturing data indicated the U.S. economy continued to improve, albeit slowly, said Mimani. “As the economy shows signs of improvement, investors reason it may make more sense to deploy capital in growth (stocks) rather than insurance/asset protection (gold).”
And in the meantime, “gold investors continue to closely watch the Fed and ‘exit plans’ from its bond-buying program,” he said.
Other metals traded on Comex headed lower, with the exception of platinum, which saw a modest gains. January platinum tacked on 70 cents, or 0.1%, to $1,449.10 an ounce, trading down about 0.4% for the week. December palladium fell by $1.50, or 0.2%, $735.30 an ounce — down about 1.6% from last Friday’s close.
December copper traded at $3.30 a pound, down about half a cent, or 0.1%. Futures prices were up about 0.9% for the week.
Metals-mining stocks followed the losses among most metals, bucking the broad climb among equities. The Philadelphia Gold and Silver Index fell 2.6%, set to lose 7% for the week, while the NYSE Arca Gold Bugs index traded 3.1% lower, down 6.9% from a week ago.
The SPDR Gold Trust /quotes/zigman/41663/delayed/quotes/nls/gld -0.87% fell 1% and was trading down about 3.1% for the week.
