Gold falls on stronger dollar, shares but fund inflows help sentiment
- Gold fell more than 1 percent on Friday, as the dollar and global shares rose. Spot gold was down 1 percent at $1,221.61 an ounce at 2:06 p.m. EST (1906 GMT), after falling as much as 1.9 percent. For the month, however, it was headed for gains of more than 9 percent, the biggest since January 2012, after safe-haven buying lifted prices to a one-year high on Feb. 11.
Concerns that a slowing global economy could eventually push the United States into recession eased as data showed U.S. economic growth slowed less than expected in the fourth quarter.
"The GDP data came out better than expected, so it gives strength to the rate debate. If rates go higher, gold goes lower," said Bob Haberkorn, senior market strategist at RJO Futures in Chicago.
Despite Friday's losses, gold has rediscovered its role as a shelter for risk-averse investors. Assets of SPDR Gold Trust , the top bullion exchange-traded fund, held steady on Thursday, after rising to their highest since March 2015 on Wednesday.
- Comex April gold settled Friday at $1,220.40 an ounce, loss for the week of $10.40, or 0.8%. March silver fell 68.4 cents, or 4.4%, for the week to $14.689 an ounce.
As a result, traders will be closely scrutinizing a heavy slate of U.S. economic data next week – including nonfarm payrolls, the granddaddy of all reports – to see if there is any kind of seismic shift that could reshape market expectations.
Gold futures were higher for the week through Thursday but fell on Friday, as stronger stocks took away some of the safe-haven bid in the yellow metal, said Sean Lusk, director of commercial hedging with Walsh Trading. The Dow Jones Industrial Average hit a seven-year high before giving back the gains in early afternoon. The dollar also rose, which tends to weigh on gold.
“The main focus will continue to be the likelihood or not of further increases in U.S. interest rates-- essentially Fed policy,” said Robin Bhar, metals analyst with Societe Generale.
Additionally, gold traders will continue to cast one eye toward the oil and stock markets. Weakness in these outside markets has tended to lead to safe-haven buying of gold, and vice-versa.
“As crude oil stabilizes, it stabilizes equity markets and that will take the safe-haven bid away from gold,” said Bill Baruch, senior commodity broker at iiTrader.
Otherwise, he said there are still reasons to be optimistic for gold in the medium term, explaining that that prices have managed to hold significant support despite improvement in the stock market.
“I think there is value for gold between $1,200 and $1,222, and any dip will attract buyers,” he said.
- Darin Newsom, senior technical analyst at Telvent DTN, said that he is cautiously optimistic -- “with an emphasis on cautiously” -- that gold still has room to make a new high at the start of a new trading month. “From a technical point of view, money is coming back and a long-term uptrend is developing,” he said.
However, he added that U.S. dollar strength could be a hurdle for gold as it rallies on positive economic data.
“The U.S. continues to prove that it is the best of the worst and that will support the U.S. dollar. If the U.S. dollar breaks out of its current range, then it will be difficult for gold to rally,” he said.
- CME Group is raising margins on gold futures for the second time this month, and this time the margin on platinum is rising as well.
The “initial” margin for speculators in the main 100-ounce gold contracts on the Comex division of the New York Mercantile Exchange will rise to $4,950 from $4,675. The “maintenance” margin for existing accounts, as well as all hedge accounts, will increase to $4,500 from $4,250. The margin will also change for smaller-sized gold contracts.
The initial margin for speculators in the main Nymex platinum futures contract will rise to $2,310 from $2,090. The maintenance margin for existing accounts, plus all hedge accounts, will rise to $2,100 from $1,900.
Reference: Reuters, Kitco
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