Gold slides 2pc amid dollar rally
Singapore, October 31, 2011
Gold prices dropped about 2 percent on Monday, after Japan's intervention in the currency market triggered a rapid rally in the dollar, spooking precious metals investors.
Japan intervened unilaterally in the foreign exchange market on Monday to curb the yen's strength, sending the dollar up more than 1 percent against a basket of currencies. A stronger greenback makes dollar-denominated commodities more expensive for buyers holding other currencies.
"The huge spike in the dollar is pressuring gold prices," said Ong Yi Ling, an analyst at Phillip Futures. "But so long as gold stays above $1,700, the sentiment should remain pretty bullish."
The most-active US gold futures contract dropped as much as 2.3 percent to $1,707.7 an ounce, and recovered slightly to $1,713.80 by 0254 GMT. It was headed for a monthly rise of 5.6 percent.
Spot gold fell nearly 2 percent to $1,705.89 earlier and regained some lost ground to $1,711.79, but was still on course for a monthly rise of more than 5 percent after suffering a nearly 11 percent decline in September.
Technical analysis suggested the upside of spot gold will be capped in a resistance range of $1,762-$1,773 per ounce, said Reuters market analyst Wang Tao.
Other precious metals weakened in tandem. Spot silver dropped as much as 2.7 percent to $34.28, and the most-active US silver futures contract also lost more than 2 percent to $34.21.
Spot platinum suffered its worst one-day loss in a month with a 2.7-percent slide. Spot palladium fell 1.8 percent to $651.99. "From here people will play the wind," said a Hong Kong-based gold dealer, "Last week gold rose too quickly and we may see a correction coming." Stop-loss selling also contributed to the quick slide in prices, he added.
Investment interest in gold was rekindled in recent weeks after euro zone leaders progressed towards an agreement on solving the bloc's debt crisis, albeit painstakingly, sending prices up 6 percent last week. - Reuters