Gold prices fell from a seven-week high Tuesday as a firmer dollar sapped interest among foreign buyers while others chose to lock in recent gains.
The most active contract, for June delivery, ended $8, or 0.7%, lower at $1,210.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
A firmer dollar, which rallied against the euro and the yen, pushed gold prices lower throughout the day. The Wall Street Journal Dollar Index, which tracks a basket of international currencies against the dollar, was recently up 0.5% at 87.37.
“We’ve had a strong advance in the dollar so that took some of the steam out of gold,” said Bill O’Neill, co-founder of commodities investment company Logic Advisors.
Gold is traded in dollars and becomes more expensive for foreign buyers when the dollar strengthens against their home currencies.
Some traders also chose to sell gold after prices surged to seven-week highs on Monday on the back of last week’s disappointing U.S. employment report. The data were released on Friday when Comex gold trading was shut in observance of the Good Friday holiday.
“It was purely the reaction to the jobs data, because the market wasn’t open on Friday to react to it,” said Dave Meger, director of metals trading with High Ridge Futures in Chicago.
Signs that U.S. job growth is slowing encouraged investors to hope that the Federal Reserve might put off raising interest rates, a move widely expected in the second half of this year.
“As long as it appears that the Fed isn’t going to do anything on interest rates, that supports gold,” said Ira Epstein, a broker with the Linn Group.
Gold doesn’t pay interest or dividends and has an easier time competing with yield-bearing investments when interest rates are pinned at zero.
January 11, 2016