The surge in the dollar is considered to be a bearish signal for dollar denominated currencies like Gold and crude.
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“Gold is down on the dollar”, said Phillip Streible, senior commodities broker for RJO Futures in Chicago.
Gold had seen some safe-haven bids earlier this week after Turkey downed a Russian fighter jet, stoking tensions between the countries, but interest has faded as investors’ focus returned to a US rate rise.
After the pullback, prices would remain low since the market has been totally convinced there will be a rate raise, and it will come, no matter what the specific date will be when it’s instituted.
Last week, gold prices touched a five-year low of $1,064 per ounce in the global market.
“And, although entering a mature phase, the dollar appreciation cycle is not done yet, and that will also be a negative driver for gold”. The greenback was trading near March’s multi-year highs against a basket of major currencies. The Federal Reserve’s benchmark US interest rate could raise twice as much as Wall Street expects in 2016.
“This is not the fed funds rate, which is set by the Federal Open Markets Committee, however, an increase in the discount rate would be interpreted as a signal of an impending December hike in the Fed Funds rate”, MKS added.
“V Sreedhar, chairman of All India Gems and Jewellery Trade Federation said, there will be a pressure in prices of gold but demand will increase as sales goes up due to improve in sentiments within moments prices are below a certain level”.
There are other factors in the commodity narrative, primarily the drop in demand from China, which has also put downward pressure on prices for months.
China’s net imports of gold from Hong Kong dropped for the first time in four months, according to data from the Hong Kong Census and Statistics Department compiled by Bloomberg.
Investors in precious-metals backed trust funds last week pulled out money at the fastest pace in 4 months, analysis from Bank of America Merrill Lynch says.
In other precious metals, silver, platinum and palladium were all heading for weekly declines.
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In other metals trading, silver jumped 1% to reach $14.22 an ounce, while platinum increased 0.2% to $842 an ounce.
