Gold in New York fell for the first day in four as a gain in the value of the US dollar reduced the appeal of the precious metal as an alternative investment.
Gold often moves in the opposite direction of the dollar, which rose against the yen and euro today after a US government report eased concerns that the Federal Reserve will cut interest rates anytime soon. The metal rose 23% last year as the dollar fell 7% against a basket of six major currencies. Gold is up 2% this year while the dollar is little changed. „The dollar is a little stronger and that could weigh on gold,” said Ron Goodis, director of Equidex Brokerage Group Inc. in Closter, New Jersey.
Gold futures for April delivery fell $3.50, or 0.5%, to $652 an ounce on the Comex division of the New York Mercantile Exchange. Prices have risen 1.2% this week after tumbling 6.2% last week. A Labor Department report showed US employers hired 97,000 workers in February, after a revised gain of 146,000 in January. That compared with a median forecast of 95,000 in a Bloomberg survey. The Fed has kept rates at 5.25% since June. „The mood of the market has shifted down in the short-term,” said Ralph Preston, a senior analyst at Heritage West Financial Inc. in San Diego. „Anytime the dollar strengthens, it's going to weaken gold's appeal.” Preston advised his clients to sell their gold positions this week and look for buying opportunities as gold dips to $620.
Gold's losses may accelerate should lower oil prices reduce gold's appeal as an inflation hedge, analysts said. Oil fell for the second straight day. „More risks are on the downside for gold, especially if dollar strength and oil weakness bring a test of the recent $633 low,” said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp. „A move below here would violate the 100-day moving average just above $635 and ignite more speculative long liquidation.” Silver also fell. Contracts for May delivery fell 15 cents, or 1.1%, to $12.97 an ounce. Prices are up 31% in the past year. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. (Bloomberg)