Gold retreats as data lifts dollar

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GoldBarplusbeads REUTERS Gold bars and granules.

London - Gold prices extended a three-day losing streak on Wednesday, as demand stagnated and the dollar hit its highest in nearly a year against a currency basket on growing optimism over the US economy.

Buying in China, the world's number one gold consumer, remains weak, dealers said, though concern over violence in Ukraine and the Middle East has fuelled some interest in the metal as a store of value.

Spot gold fell 0.1 percent to $1,294.15 (R13,847) an ounce at 11:37 SA time, while US gold futures for December delivery dropped $1.20 an ounce to $1,295.50.

The metal has traded within its narrowest monthly range in five years so far in August, of just over $42.

“(Gold is under pressure from) a combination of the stronger dollar, together with ongoing weak demand,” Heraeus trader Alexander Zumpfe said.

“It's a bit frustrating from a trading perspective - it's not only range trading, this range is also very tight.”

The dollar reached an 11-month peak against the euro and a basket of major currencies on Wednesday, buoyed by optimism over the health of the US economy.

Strong US housing data lifted Wall Street shares on Tuesday, nudging Treasury yields higher and helping the dollar extend gains against the euro and yen. Gold tends to suffer from strength in the dollar, in which it is priced.

World stocks mostly halted their recent rally on Wednesday ahead of the release of minutes of the Federal Reserve's July meeting at 20:00 SA time, while UK stocks and bonds fell after Bank of England minutes showed two rate-setters voted to raise interest rates earlier this month.

 

FED AHEAD

Gold is highly sensitive to the outlook for US economic policy, after benefiting strongly from ultra-loose monetary conditions in the wake of the financial crisis.

Any sign that the Fed is reining in that policy more quickly than expected could hurt prices.

“A clearer and stronger policy message from the Fed is needed to shift gold price expectations materially from here,” UBS said in a note on Wednesday.

“Given the general trend in macroeconomic data and the seeming complacency of market participants right now, the greater risk is for a hawkish surprise. A move to the downside would easily spook the 3.47 million ounces of net length that was recently added.”

Fed Chair Janet Yellen will also address an annual gathering of policymakers in Jackson Hole, Wyoming, on Friday.

Silver was flat at $19.43 an ounce, while spot platinum was down 0.2 percent at $1,429.75 an ounce and spot palladium was down 0.9 percent at $870.72 an ounce.

Impala Platinum's Zimbabwe unit Zimplats has ceased operations at its Bimha mine following an underground collapse in July, the company said on Wednesday, adding that the stoppage could cost it 70,000 ounces in 2015. - Reuters



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