MW: Gold drops on reduced investor demand, U.S. dollar strength
By Cynthia Lin, MarketWatch
NEW YORK (MarketWatch) -- Gold futures slid on Monday, giving back a portion of the previous session's gains, as the U.S. dollar strengthened against other major currencies and investors reduced their holdings of the precious metal.
Gold for August delivery dropped $5.70, or 0.5%, to $1,204.10 an ounce on the Comex division of the New York Mercantile Exchange.
The contract hit an intraday low of $1,201.50 an ounce.
"Short-term oriented market participants seem to continue taking profits," wrote Commerzbank analysts in a note. "Thus, the net long positions of speculative financial investors fell."
The U.S. Commodity Futures Trading Commission reported that positions in Comex gold held by non-commercial investors posted their largest weekly drop since July 2007, according to a Barclays note. Long positions fell by 35,700 lots to 209,000 lots for the week ended July 6, their lowest level in three months.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD 117.85, -0.51, -0.43%) , reported an outflow of 1.5 metric tons on Friday, amounting to a reduction of 6 metric tons month-to-date. Holdings in the ETF had hit a record high on June 29.
Meanwhile, investors showed signs of renewed optimism in the pace of global economic recovery. U.S. stocks closed out their strongest week in nearly 12 months on Friday, as investors remained optimistic about the second-quarter earnings season.
Equity futures were pointing to a lower opening on Monday, however, as caution dominated ahead of the release of second-quarter earnings by aluminum giant Alcoa Inc. (AA 11.05, +0.11, +1.01%) .
While investors shift away from the safety of gold, physical interest in bullion has continued to prevent the yellow metal from falling far below the psychological mark of $1,200 an ounce.
In the currency markets, the dollar rose against its major rivals.
The dollar index (DXY 84.32, +0.37, +0.44%) , which measures the performance of the greenback, gained 0.4% to 84.300. Dollar strength typically weighs on dollar-denominated commodities such as gold and oil.
