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Gold slumps to lowest level in almost 4 months as dollar soars

Published 03/10/2015, 10:10 AM
Updated 03/10/2015, 10:10 AM
© Reuters. Gold futures fall to lowest level in almost 4 months

© Reuters. Gold futures fall to lowest level in almost 4 months

Investing.com - Gold traded at the lowest level in nearly four months on Tuesday, as the U.S. dollar rallied amid growing expectations for a near-term rate hike in the U.S.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery touched a session low of $1,154.30 a troy ounce, a level not seen since December 1, before trading at $1,164.40 during U.S. morning hours, down $2.10, or 0.18%.

Futures were likely to find support at $1,141.70, the low from December 1, and resistance at $1,174.40, the high from March 9.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, climbed 0.69% to 98.30, the strongest since September 2003.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

The dollar remained broadly supported after the latest U.S. jobs report heightened expectations for higher interest rates.

The Fed is expected to begin raising interest rates around the middle of this year and investors were looking ahead to next week’s policy statement to see if it would drop its reference to being patient before raising rates.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

On Monday, gold ticked up $2.20, or 0.19%, to end at $1,166.50 amid tense talks between Greece and the Eurogroup of finance ministers about Greek reform proposals.

Greece reportedly agreed to allow experts representing the European Commission, ECB and International Monetary Fund to start work in Athens on Wednesday.

Last month Athens reached a temporary agreement with its lenders to extend its bailout by four months, but must complete a bailout review by April before it can access further financial aid.

Meanwhile, silver futures for May delivery slumped 4.3 cents, or 0.27%, to trade at $15.73 a troy ounce after hitting an intraday low of $15.58, the weakest level since January 5.

Elsewhere on the Comex, copper for May delivery tumbled 4.9 cents, or 1.83%, to trade at $2.622 a pound after data showed that producer price deflation in China deepened in February, underling concerns over a slowdown in the world's second largest economy.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

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