Gold Futures Slide As Crude Oil Declines, Dollar Index Rises
San Francisco (Dec 30) Gold futures were knocked down to nearly a two-week low Wednesday by moves in outside markets, as crude oil futures fell sharply while the U.S. dollar rose.
As of 1:11 p.m. EST, Comex February gold was $8.40 weaker at $1,059.60 an ounce. The contract fell as far as $1,058.50, its weakest level since Dec. 18. March silver was down 8.8 cents to $13.84.
“It looks like it’s more of a reaction to other markets (rather than any specific gold-related news),” said Howard Wen, precious metals analyst with HSBC. “You have cheaper oil prices today, and you have a stronger dollar.”
Nymex February crude oil was down $1.29 to $36.58 a barrel. The commodity, already under pressure for some time now, faced added downside after a larger-than-expected build in U.S. oil stockpiles. The Energy Information Agency reported that cruse stocks rose by 2.6 million barrels last week when the market had been expecting a decline instead.
Oil tends to be a bellwether for the commodity complex and can therefore impact other markets, particularly when funds move in and out of a wide range of commodities at the same time. Lower energy prices also mean less inflationary pressures.
Meanwhile, the March U.S. dollar index was up 0.277 point to 98.450. Traders often buy gold as sort of an alternative currency when the greenback weakens and conversely sell as the dollar strengthens. Further, a more muscular dollar makes all commodities more expensive in the currencies of other countries and thus can influence demand.
“Overall, the weakness in gold all year is associated with the stronger dollar,” said Ralph Preston, principal with Heritage West Financial.
He added that there is some end-of-year book squaring occurring in the gold market. Preston also suggested not reading too much into the move, however, since it is occurring in exceptionally light volume when markets are thinned by the Christmas and New Year holidays.
“With this kind of price action, it’s hard to attribute it to any kind of news,” he said.
Gold is now below both the 10-day and 20-day moving averages of $1,067.90 $1,068, respectively. Technically, major chart support for Comex gold now lies at the double-bottom so far this month of the Dec. 17 low of $1,046.80 an ounce and the Dec. 3 low of $1,045.40. Resistance lies at the Dec. 4 high of $1,088.30. The 50-day average lies at $1,096.20, with the 100- and 200-day averages well above this.
For March silver, major support lies around the Dec. 14-15 lows of $13.62 and $13.635. Resistance is seen at the Dec. 7 high for the month of $14.64.
Source: KitcoNews
