BD:Gold down 1% on firm dollar ahead of Fed testimony
LONDON — Gold, down in seven of its past eight sessions, was about 1% weaker on Tuesday on a firm dollar, weak technical signals and speculation that the US Federal Reserve might rein in its stimulus programme.
Gold has been hit by a shift in investment into higher-yielding equities since the start of 2013 on signs of an improving global economic outlook, particularly in the US.
Spot gold hit a session low of $1,377.04 an ounce and was trading down 0.9% at $1,380.59 at 10.04am GMT, unable to sustain initial gains around the $1,400 level.
It touched its weakest since April 16 at $1,338.95 on Monday, before gaining 2.6% in US trade and snapping a seven-session slide that was its longest losing streak since March 2009.
US gold futures for June delivery were down 0.3% to $1,379.30 an ounce.
"The market was caught horribly short yesterday, so there was some buying this morning. But the dollar started to get stronger and gold didn’t manage to break above $1,400, so sales started again," Marex Spectron head trader David Govett said.
"The market is being driven by algos trading on the Chicago mercantile exchange platform while the real money, the big funds, are not playing in this." Algorithmic trading uses advanced mathematical models for making transactions.
The dollar was up 0.3% against a basket of major currencies, but below its recent three-year high, on uncertainty over the message that Fed chairman Ben Bernanke would deliver when he speaks to the US Congress on Wednesday.
The market will also focus on the FOMC minutes from the central bank’s April meeting.
"Should Bernanke encourage perceptions that the Fed could move somewhat earlier than expected, gold could get hurt as a change in stance may finally usher in higher interest rates," INTL FCStone analyst Edward Meir said.
On Monday, Fed official Charles Evans said the central bank could continue its bond buying through the US summer, but end it abruptly in the autumn if the central bank became confident about its jobs outlook.
Tighter monetary policies in the US would weigh on gold as they should strengthen the dollar, making the metal more expensive for holders of other currencies.
Outflows continued in SPDR Gold Trust, the largest gold-backed exchange-traded fund, with holdings down to 1,031.50 tonnes on Monday, their lowest in more than four years.
Physical demand strengthened in China, while buying in India, the world’s top gold consumer, has been slowing as its central bank tries to rein in the country’s deficit with steps to cut gold and silver imports, which shot up 138% in April.
Silver under pressure
Silver remained under pressure, but well off Monday’s lows, when it slid nearly 10% to a two-and-a-half-year trough, on heavy fund liquidation in Asian trade and generally weak fundamentals for the metal.
Spot silver was down 1.4% at $22.60 an ounce, but still $1.80 higher than the previous session’s lows, having staged a short-lived recovery in US trade.
Holdings of the largest silver ETF, the iShares Silver Trust, fell to their lowest since mid-January at 329.631 million ounces on Monday.
"For now, the focus remains on the fading appeal of gold, and as a result, those who have used silver as a way of expressing exposure to the gold price have followed this trend," UBS analyst Joni Teves said in a note.
In other precious metals, platinum was down 1.3% to $1,465.49 an ounce and palladium off 1.4% to $736.50 announce.
