Gold’s run of 4 gains looks vulnerable at hands of recovering dollar
London (July 20) Gold prices dipped into the red early Thursday, struggling to extend their latest run to a fifth-straight gain, as the dollar again tried again to recover from the 10-month lows hit in recent days.
Market attention was fixed on the latest European Central Bank policy meeting Thursday and its implications for currencies, and by default, metals.
Ahead of that meeting conclusion, August gold GCQ7, -0.43% was down $4.70, or 0.4%, at $1,244.10 an ounce. The contract settled Wednesday at $1,242, its highest finish since June 30, according to FactSet data. It has tallied a climb above 2% so far this week.
The ICE U.S. Dollar Index DXY, +0.32% which compares the buck against a half-dozen other currencies, was up 0.2% at 95.02, but remained slightly lower for the week so far.
A weaker dollar tends to be supportive to commodities, like gold, priced in the currency, making them more attractive to buyers using weaker monetary units.
Investors will tune into what the European Central Bank may say about monetary policy when it releases its statement at 7:45 a.m. Eastern U.S. Time, followed by a press conference from ECB President Mario Draghi.
Analysts do not expect any interest-rate changes from the ECB. Its €60 billion-a-month asset program expires at the end of the year. Traders do look to each meeting for clues regarding what comes next, with some guessing more details could emerge in September when the central bank releases its new macro-economic projections.
“We expect the ECB to be very subtle in their approach and the main agenda for them would be to reinforce their forward guidance. What we do want to hear from the ECB is that the policy members have discussed the topic of tapering,” said Naeem Aslam, chief market analyst at ThinkMarkets.
“Although the ECB event is an important factor today, we do think the main denominator which matters the most is the dollar here,” said Aslam. “The weakness in the unemployment claims and Philly Fed manufacturing index could resume the selloff in the dollar and that would push the yellow metal higher.”
The jobless claims and Philadelphia-area reports are due for release at 8:30 a.m. Eastern. Leading economic indicators will be released at 10 a.m. See the MarketWatch calendar.
Among other metals, September silver SIU7, -0.84% fell 12 cents, or 0.7%, to $16.17 an ounce.
Meanwhile, October platinum PLV7, -0.71% fell by $6.50, or 0.7%, to $917.70 an ounce and September palladium PAU7, -0.74% fell $5.60 at $853.55 an ounce, down 0.6%.
And in exchange-traded products, the SPDR Gold Shares GLD, -0.03% was down 0.4% premarket, the VanEck Vectors Gold Miners ETF GDX, +0.18% fell 0.4%, and the iShares Silver Trust SLV, +0.13% was down 0.5%.
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