The gold price retreated in the US on Monday amid a bounce in the dollar and some mildly hawkish comments from the head of the Federal Reserve.
Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $16.7 or 1.37 percent at $1,184.00 per ounce. Trade has ranged from $1,183.30 to $1,199.60.
“The reason for the recent rally in precious metals was nothing more sinister than short covering,” said Marex Spectron’s David Govett, who noted that short positions by funds had risen to 84,000 contracts in the week ending March 24, the highest since data started to be collected in 2006.
“We now see the dollar once again resuming its upward trajectory and precious metals resuming their downward one. With the gold price at these levels, there was little to no physical demand and without fresh investment, selling the rally has once again proved the way forward,” Govett added.
In wider markets, the dollar was last 0.45 percent stronger at 1.0840 against the euro, while Germany’s DAX and France’s CAC-40 were up 1.35 percent and 0.96 percent respectively.
The pullback in gold also picked up steam after Federal Reserve chairwoman Janet Yellen said late on Friday that an increase in the benchmark federal funds rate “may well be warranted later this year” given a sustained improvement in US economic conditions.
The members of the Fed’s policy board are locked in what has become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. The current market consensus is that the first increase will happen in the second half of this year.
“We see [Yellen’s comments] as being of a more clarifying nature and in our mind perhaps just a very little bit more hawkish than we had thought her to be heretofore,” Dennis Gartman, editor of the Gartman Letter, said.
In news elsewhere, Greece’s creditors have demanded that Greece implement reforms before seven billion euros of its bailout fund are disbursed.
And People’s Bank of China (PBoC) governor Zhou Xiaochuan said over the weekend that the dollar could grow “too strong” and that there is more room for Beijing to ease monetary policy further to boost its economy if needed.
Domestic growth has slowed, he noted, but the central bank has room to act on interest rates or with fresh quantitative easing measures.
In a fairly quiet day for data, the Spanish flash CPI at -0.7 percent was better than expected, while German preliminary CPI and US personal spending, personal income and pending home sales are due later. Later this week, China will release its manufacturing PMI and non-manufacturing PMI.
As for the other precious metals, Comex silver for May delivery was down $16.665 or 2.37 percent at $16.665 per ounce. Trade has ranged from $16.650 to $16.990.
Platinum for July delivery on the Nymex was down $18.20 at $1,122.30 per ounce, while the most actively traded palladium contract was at $743.50, up $2.50.
(Editing by Mark Shaw)