Tags: Gold | Futures | Dollar | Yellen

Gold Futures Tumble as Dollar Rallies on Yellen News

Wednesday, 09 Oct 2013 03:46 PM

Spot gold fell nearly 1 percent on Wednesday, and gold futures fell 1.3 percent in New York, as the dollar rose while investors digested news that Federal Reserve Vice Chair Janet Yellen would be nominated as the next chief of the U.S. central bank.

Spot gold was down 0.9 percent at $1,306.69 an ounce by 2:54 p.m. EDT (1854 GMT). U.S. gold futures for December delivery settled down $17.40 an ounce to $1,307.20, with trading volume about 5 percent below its 30-day average, preliminary Reuters data showed. Gold futures prices dropped suddenly between 10:10 and 10:20 a.m. EDT to an intraday low of $1,294 an ounce, with volume of some 15,000 lots changing hands in 10 minutes, about a fifth of the market's trading activity at the time. Options dealers reversed their earlier trades by selling put options and buying calls, a move seen as bullish for gold prices, said Comex gold options floor trader Jonathan Jossen.

Bullion stayed lower after news the Fed's shock decision last month not to reduce its support for the U.S. economy was a "relatively close call" for policymakers, according to minutes of the meeting that also suggested there was still broad support to trim bond-buying this year.

Trading volume, which has been light this week, heated up briefly for about 10 minutes in U.S. morning trade. Prices remained rangebound, with buyers on the sidelines due to a lack of U.S. data and anxiety over how the stand-off in Washington will play out, as a U.S. government shutdown continues.

Analysts said it looked like investors were losing confidence in gold as a safe haven, noting that the precious metal did not rise as much as some had thought it would as the Oct. 17 deadline neared for a potential U.S. debt default.

"This lack of response to the U.S. shutdown may mask an underlying negative investor sentiment," said James Steel, chief precious metals analyst at HSBC. "At the very least gold's safe-haven bid is lacking. Some of the explanation for this may be that currency markets have not moved sharply," Steel said.

The dollar rose from an eight-month low against major currencies as news that Yellen will be nominated as the next Fed chief. Yellen is expected to continue the Fed's asset-buying program, which has pressured the dollar. Still, the news brought some relief to investors who have been on edge because of the budget deadlock in Washington.

BUDGET CRISIS EYED, ETF HOLDINGS DOWN


Republicans and Democrats in Congress saw signs of hope for a break in their fiscal impasse, as members of both parties floated the possibility of a short-term increase in the debt limit to allow time for broader negotiations.

Congress faces a deadline to increase the $16.7 trillion borrowing limit to avert the risk of a default on U.S. debt.

As a gauge of investor interest, the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, reported its holdings fell 1.8 metric tons on Tuesday. The fund has seen outflows of nearly 8 tons since the U.S. government shutdown on Oct. 1.

Among other precious metals, silver dropped 1.6 percent to $21.90 an ounce, tracking losses in gold. Platinum was down 1.2 percent at $1,379.10 an ounce, while palladium fell 1.6 percent to $700.72 an ounce.

© 2017 Thomson/Reuters. All rights reserved.

 
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Spot gold fell nearly 1 percent on Wednesday, and gold futures fell 1.3 percent in New York, as the dollar rose while investors digested news that Federal Reserve Vice Chair Janet Yellen would be nominated as the next chief of the U.S. central bank.
Gold,Futures,Dollar,Yellen
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2013-46-09
Wednesday, 09 Oct 2013 03:46 PM
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