Gold Prices Remain On The Defensive, Long-Term Sellers Erode Support

London (July 4)  The dollar has maintained a generally firm tone which has limited support for gold with only a very limited correction form Monday’s sharp losses as long-term investors continued to withdraw funds.

Gold prices remained under pressure during the New York session on Monday with the combination of dollar strength, rising bond yields and gains in equity markets triggering sustained selling pressure and 7-week lows close to the $1,220 per ounce level.

The fresh decline in US technology stocks provided some degree of relief for prices, although there was no evidence of significant buying support.

The North Korean missile test provided some support to gold prices during the Asian session on Tuesday as the Japanese currency also gained some fresh demand.

The dollar overall maintained a firm tone which limited potential support for gold as USD/JPY regained the 113.00 level from lows near 112.75 following the Korean missile reports. A correction lower in bond yields, together with modest losses in equities were also unable to trigger any sustained support for gold.

Gains in prices were limited by further evidence that underlying investor demand for gold has weakened, especially with evidence that long-term investors are pulling out of gold.

In this context, gains were held to the $1,225 area during European trading.

Trading conditions are liable to remain subdued in the very short term given the US market holiday with price action over the remainder of the week driven by key US economic data and global monetary policy expectations.

SOURCE: ECONOMIC-CALENDAR