In New York, gold was down to its lowest in over two months amid a strengthening dollar, curbing demand for protection of wealth. The U.S. currency futures climbed to seven-month highs against ten major counterparts prior to data to be released today that economists believe will show U.S. manufacturing was the highest since April 2011 last month.
Silver futures also slipped in New York while palladium dropped from previous 13-month highs.
Gold falls as dollar climbs
The dollar has strengthened amid the potential for the Federal Reserve to increase interest rates and the possibility of an improving economy. Gold prices climbed 5.8 percent this year, due partially to overseas conflict. The tensions in Ukraine have made it more likely that the European Union would enforce wider sanctions on Russia. Russia is currently the largest producer of palladium. The metal has risen to the highest price seen since February 2001, according to Bloomberg.
Simon Weeks, head of precious metals at the Bank of Nova Scotia said, "Clearly a lot of people already have a hedge on board against the geopolitical scenario, physical (demand) doesn't seem particularly good, China and India just aren't performing in the way people might expect, and the threat of higher interest rates is more likely to encourage producers to be sellers again. It just doesn't look good for the bulls," according to Reuters.
Gold for December delivery was down 1.1 percent to $1,272.80 an ounce on the Comex in New York. It reached the lowest since June 18 at $1,268.50. Bloomberg generic pricing reports that bullion for immediate delivery also fell 1.1 percent to $1,271.88 in London.
David Govett, head of precious metals at Marex Spectron Group in London, said in a note to Bloomberg today, "Gold has suffered with the stronger dollar." Govett added that reports are due today, "which are expected to show that the U.S. economy is continuing to prosper and this in turn may pressure gold."
On Tuesday, European shares climbed 0.3 percent as investors hold off on chasing stocks higher as they await the ECB's policy decision later this week. According to Reuters, stock markets have rallied recently due to dovish comments by ECB President Mario Draghi. These comments influenced bets that the central bank is going to pump more liquidity into the system through the purchases of government or corporate bonds, a process known as quantitative easing.
Transactions will be booked for settlement purposes today after floor trading in New York was shut down for the Labor Day holiday. Data found by Bloomberg showed that futures trading volume was twice the average for the past 100 days for this time of day.
Geopolitical conflict weighs on precious metals
Gold prices have risen 23 percent this year due to increased usage in catalytic converters and a five-month mine strike that ended in June in the second-largest producer of the metal, South Africa, which added to supply shortages. Russia has fought the previous sanctions by refusing to import some food products. However, Russia has yet to put any restrictions on metal so far.
"While there haven't been any metal-related restrictions just yet, disruptions in Russian supply could have a significant impact on the global availability of palladium," ANZ said in a note, according to Reuters.
Palladium prices reached their highest since the middle of 2002 this week compared to platinum, as one ounce of platinum is worth 1.57 ounces of palladium. Compared to gold, they were at their highest in nearly ten years.
Spot platinum traded lower by 0.2 percent at $1,414 an ounce, while spot silver fell 1.1 percent at $19.23 an ounce, reports Bloomberg.
Globally, gold showed losses of 0.40 percent at $1,280.41 an ounce in Singapore today, reports the Economic Times.
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