Published On: Thu, Oct 10th, 2013

Gold price drops on stronger dollar

Gold was close to US$1,300 (RM4,154.80) an ounce on Thursday and edging lower on signs the Federal Reserve may trim its stimulus measures this year and as the dollar rebounded after President Barack Obama began meetings with lawmakers to resolve the US budget crisis.

Safe-haven buying in the last few sessions, as a result of the US government shutdown, evaporated as the US dollar climbed off eight-month lows, also helped by the nomination of Janet Yellen as the next Fed chief.

Physical buying failed to pick up despite the lower prices, raising questions about what could support gold prices after the US budget impasse is resolved.

“The fact that gold is not going up, even with the shutdown, is a bad sign,” said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo. “The mood in the market is bearish. Even at this US$1,300 level we don’t see much physical buying. It doesn’t look too good for gold.”

Spot gold had fallen 0.24% to US$1,303.46 (RM4,176.29) an ounce by 11 am, after losing around 1% the session before.

Gold has fallen about 22% this year on fears the Fed will start cutting back its US$85 billion (RM271.6 billion) bond purchases as the US labour and housing markets showed some growth. The
central bank stunned markets last month when it decided not to taper.

However, minutes from the September policy meeting released yesterday showed that the Fed’s decision last month was a “relatively close call” for policymakers and there was still broad support to trim bond-buying this year.

The US shutdown and concerns over the debt ceiling deadline should have pushed up prices, but gold is still trading below pre-shutdown levels of about US$1,340 (RM4,282.64).

“How the US dollar moves in the near term may provide direction for gold,” HSBC analysts said in a note. “It is possible that investors will move into Treasuries as a safe haven despite the possibility of a US default. This could reduce yields and bolster the dollar, but detract from gold.” – Reuters, October 10. 2013.

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