Gold falls 1 pct on strong dollar, heads for third weekly drop

Gold falls 1 pct on strong dollar, heads for third weekly drop
Business & Markets 2013
Written by Reuters
Friday, 12 April 2013 19:44


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LONDON (April 12): Gold fell one percent on Friday, on track for its worst week since late February, as the dollar rose and equity markets slid.

Outflows from exchange-traded fund underlined the shaky outlook for bullion.

Traders said stop losses - automatic sale orders placed at pre-set levels to limit losses - went through at $1,560, causing a push lower in mid-morning trade, while selling accelerated as the metal fell through key chart support at $1,548.

Gold fell as low as $1,544.49 an ounce and was down 0.8 percent to $1,548.50 by 1049 GMT, heading for a 2-percent decline this week, its third such drop in a row.

The metal looked on track to re-test the 11-month low of $1,539.10 hit on April 4, traders said.

Gold has slipped around 7 percent so far this year and is matching a downtrend in other commodities and equity markets ahead of the U.S. retail sales, which will be monitored by the market to test the health of the world's biggest economy.

Meanwhile, the dollar strengthened against the euro and a basket of main currencies.

"For the rest of the day people are going to have a look at what's happening with U.S. retail sales, which are closely tied with what is happening in the U.S. employment sector," Standard Bank analyst Walter de Wet said.

"If retail sales are largely in line with expectation, the $1,550 area will hold but if it's substantially better then expect a test of the low $1,540s."

Wary investors continued to cut exposure to gold, with total holdings at the world's major bullion gold-backed exchange-traded-funds (ETFs) falling to their lowest since early 2012.

Holdings of the largest fund, New York's SPDR Gold Trust GLD fell a further 2.1 tonnes, or 67,710 ounces on Thursday, after a 17-tonne outflow on Wednesday.

"Gold still looks quite poor in terms of price action and any rebound looks unable to make any significant move higher... investors are still cautious and you see that looking at the continued ETFs outflows," Standard Chartered analyst Daniel Smith said.

"The risks are building that we are going to see significant corrections in the next few weeks and my recommendation is to expect higher volatility in the short term."

EU finance ministers meeting in focus

The fallout from the messy bailout of Cyprus will top the agenda of a two-day EU finance ministers meeting in Dublin beginning on Friday.

Heavily indebted euro zone nations such as Italy and Portugal could come under pressure to put their bullion reserves to work, after plans for Cyprus to sell gold to meet its financing needs.

The physical market was barely active, with jewellers in Thailand already away ahead of the Songkran holiday next week. Premiums for gold bars were unchanged in Singapore at $1.20 an ounce to spot London prices.

Although top consumer India will celebrate a series of religious festivals considered auspicious for gold purchases, dealers have yet to see a surge in demand from jewellers there.

Japan's aggressive monetary stimulus initially supported gold this week, but investors were later distracted by signs the U.S. Federal Reserve could soon end its bullion-friendly bond buying programme.

Silver was down 0.7 percent at $27.40 an ounce.

Spot palladium was down 1.9 percent to $714, while spot platinum was down 1 percent at $1,516.99 an ounce.