Gold fell more than 1 percent on Monday, briefly dipping below $1,410 an ounce, as the dollar rose after hawkish comments from a Federal Reserve official last week and as impetus from unrest in the Middle East petered out.
|||Gold fell more than 1 percent on Monday, briefly dipping below $1,410 an ounce, as the dollar rose after hawkish comments from a Federal Reserve official last week and as impetus from unrest in the Middle East petered out.
Spot gold slipped as low as $1,409.95 an ounce and was bid at $1,412.09 at 14:30 SA time, against $1,427.75 late in New York on Friday. U.S. gold futures for April delivery fell $13.70 an ounce to $1,412.50.
The precious metal rallied to a record $1,447.40 an ounce last week as violence in the Middle East and North Africa and re-emerging sovereign debt concerns in the euro zone prompted risk-averse buying of gold.
But it struggled to maintain traction at that level.
“In the March rebound, the momentum wasn't there for follow-thorugh buying,” said VTB Capital analyst Andrey Kryuchenkov. “Yes, we touched a fresh high, but there were no significant longs created.”
He said concerns over how far unrest in the Middle East and North Africa could spread are starting to ease, while worries over the indebtedness of some smaller euro zone economies are softer than they were a year ago.
The euro slipped versus the dollar early on Monday after German Chancellor Angela Merkel's conservatives lost a key state election. A consequently stronger dollar pressured gold, which becomes more expensive for other currency holders as the U.S. unit appreciates.
The dollar benefited from comments late last week from Federal Reserve official Charles Plosser, who said the central bank will have to reverse its easy money policy in the “not-too-distant future” to avoid inflation.
Prospects that U.S. monetary policy may tighten are usually seen to be negative for gold as a non-interest bearing asset.
TREASURIES UNDER PRESSURE
Elsewhere German government bonds fell on news the European Central Bank plans to throw a lifeline to Ireland's banks, while U.S. Treasuries eased as investors upped interest rate hike bets.
Portuguese bonds meanwhile remained under pressure as the country faced snap elections which could make it difficult for Lisbon to finance itself ahead of bond redemptions in April and June.
Concerns over the fiscal health of the euro zone remain a supporting factor for gold, but may not prevent an imminent further correction, analysts said.
“We can fall back to $1,400, maybe even a bit below, and it still looks good overall. There is still a lot of uncertainty out there,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia.
“But unless there are more black swan events out there, I think gold will struggle on the upside.”
Elsewhere a report from the U.S. Commodity Futures Trading Commission on Friday showed speculators in gold and silver futures and options increased their net long positions as prices rose last week.
Net longs, or bullish positions, under managed money in gold futures rose nearly 3 percent in the week to March 22, while silver's net longs also gained about 4 percent.
“Gold's ascent has ... been relatively orderly and volatility has remained relatively low despite higher spot prices,” said UBS in a note.
“Given persistent global uncertainties, we retain our one-month forecast at $1,450 as gold should continue to fare well, but significant moves to the upside will require stronger participation by investors.”
Silver was bid at $36.46 an ounce against $37.29. The metal rose 6.4 percent last week on gold's coat-tails, hitting its highest since 1980 at $38.13 an ounce.
Among other precious metals, platinum was at $1,722.99 an ounce against $1,742.45 and palladium at $734.97 against $744.95. - Reuters
Source: http://www.iol.co.za/gold-falls-below-1-410-oz-1.1048430
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