G-7 aims to ease currency-war fears
By Barbara Kollmeyer and Sarah Turner, MarketWatch
MADRID (MarketWatch) — Gold limped along in lackluster trading on Tuesday, with technical selling and departing investors keeping pressure on the precious metal. A strong dollar wasn’t helping either.
Gold for April delivery GCJ3 -0.01% inched up $1 to $1,650.10 an ounce in electronic trading. That’s off from a low of $1,643 an ounce reached earlier in the Asian session, according to FactSet data.
Gold futures fell to a five-week low on Monday to settle below $1,650 an ounce on reports that a coordinated effort was being made by Group of Seven nations to avoid a global currency war. Read: Gold ends at five-week low on currency talk
The market was little surprised by the joint G-7 statement that came on Tuesday, which said members won’t target exchange rates. See: G-7 says members won't target exchange rates
Many nations have been allowing their currencies to depreciate in order to drive up growth.
“I don’t think initiatives out of the G-7 will have a particularly significant impact on gold other than indirectly through the dollar,” said Ross Norman, chief executive officer of Sharps Pixley, in emailed comments. He said they are expecting modest gains for gold this year, not double-digit increases that have been seen on average over the last 12 years.
“The gold market is obsessing with technical levels and the dead weight of some steady selling from departing investors,” said Norman.
Andrey Kryuchenkov, an analyst at VTB Capital in London, said that gold dropping below $1,653 an ounce the prior day triggered additional sell-stops for the precious metal. “The technically driven selloff is likely to further undermine already-shattered investor confidence in gold,” he said in emailed comments.
He said exchange-traded gold is likely to see a sharp retreat in speculative long positions after a robust rebound at the start of February. “At the moment, gold is an investor-driven market with little physical interest and the investor community will be very unhappy with bullion’s performance this year, especially when contrasting with returns in equities, energy and most important, PGMs (platinum group metals),” Kryuchenkov said.
The ICE dollar index DXY -0.12% , which measures the U.S. currency’s performance against six major rivals, reached 80.270 from 80.201 in late North American trading on Monday.
Commodities priced in dollars, including gold, often trade inversely with the greenback. Moves in the U.S. unit can influence the attractiveness of metals to holders of other currencies.
North Korea move
Gold got some respite earlier in Asian hours as markets took a “risk-off bias” following reports of seismic activity in North Korea, according to Sue Trinh, strategist at RBC Capital Markets.
A Xinhua news report cited the South Korean Defense Ministry as saying the tremor appeared to be a nuclear test, while the South’s Yonhap News Agency quoted an official as saying it was a “high possibility” the tremor in the North was a nuclear detonation. Read: North Korea conducts nuclear-weapon test: reports
“Local media reported yesterday that a nuclear test was imminent, likely today or Saturday. Indeed, the South Korean government stated that North Korea had advised the U.S. and China of the test in advance,” Trinh said.
In other metals trade, March silver SIH3 +0.08% was flat at $30.92 an ounce and March copper HGH3 +0.44% rose 1 cent at $3.74 a pound.
April platinum PLJ3 +0.26% jumped $20.50, or 1.2%, to $1,716.60 an ounce, while March palladium PAH3 +1.00% rose $7.15 to $765.75 an ounce. Analysts at Commerzbank noted that as outflows have moved away from gold exchange-traded funds, they’ve shifted into silver, platinum and palladium ETFs.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.
Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW.
