FX:Gold futures drop 1% on weak technical outlook, stronger USD
Forexpros - Gold futures retreated on Tuesday, as a broadly stronger U.S. dollar weighed on the appeal of the precious metal while traders were also looking at technical indicators for signs of where gold prices will next head.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,649.75 a troy ounce during early European morning trade, dropping 1.05%.
It earlier fell by as much as 1.15% to trade at a two-day low of USD1,648.55 a troy ounce.
Gold futures were likely to find support at USD1,634.75 a troy ounce, the low from March 14 and short-term resistance at USD1,669.85, the previous dayā€™s high.
Gold prices have been under pressure in recent weeks as investors unwound long gold positions after the Federal Reserve gave an upbeat assessment of the U.S. economy earlier in the month, which reduced expectations for a third round of U.S. monetary easing by the central bank.
Gold has fallen around 8% since late February and are about 14% below the all-time high of USD1,920 per ounce hit in September.
With a fresh catalyst absent to guide prices, gold traders are eyeing technical indicators for signs of where prices will next head. Gold closed below its 200-day moving average last Friday, a bearish sign for the precious metals market.
Barclays said in a report Monday that, "Should gold close below USD1640, we would concede defeat,ā€¯ adding that, "physical demand has been quiet, with only sharp price corrections triggering interest."
Meanwhile, other market participants noted that, with prices now trading well below their long-term technical support, gold could extend losses to USD1,580 an ounce in the short term before recovering.
Market talk that hedge funds and large institutional investors were exiting the gold market and moving in to equities also added to the selling pressure.
The sharp rise in U.S. Treasury yields since last week has also weighed on gold, due to the knock-on effect on the dollar, which tends to gain in a rising rate-environment.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.31% to trade at 79.93.
Gold traders were awaiting a speech from Fed Chief Ben Bernanke later in the day at an event in Washington; his comments would be closely watched.
Elsewhere on the Comex, silver for May delivery tumbled 1.8% to trade at USD32.34 a troy ounce, while copper for May delivery fell 0.75% to trade at USD3.880 a pound.
