Gold futures decline by more than two per cent last week as monthly data in the U.S. manufacturing sector came in relief better than expected which supported prospects for a retraction in the Federal Reserve’s bond-purchasing programme and a surging increase in the U.S. dollar.
Gold for February delivery declined $28.50 or 2.3 % that settles at $1,221.90 per ounce on the Comex division of the New York Mercantile Exchange, that eradicated the 1 % gain from last week’s shortened session.
Keeping track of the most-active futures contracts settled at its lowest level since the third quarter and consequently suffered from their largest single-day drop. The precious metal fell 5.5 % in the early month of the 4th quarter, its largest since June.
Silver also didn’t fair much better on a percentage basis with its March futures for metal commodities falling down 3.7 % at $19.29 per ounce. This was regarded as the lowest settlement for the precious metal future since the third quarter.
The continued decline for gold show traders’ were alarming the economic data which were in support of the argument that the tapering efforts were indeed the playing hand of the economy at present. Traders who have been looking at the economic data for indications when the U.S. Reserve will begin to slow down its bond-purchasing programme are anticipating that the quantitative easing could boost the dollar and pressure the dollar-denominated gold by the year’s end.
In the U.S., manufacturing conditions have greatly improved while the institute for supply management’s manufacturing index surged up to 57.3 %, a total of 1.8 % in the early months of the 4th quarter which was its highest leap more than three years ago.
The U.S. dollar index DXY was 0.0050 % following the series of better-than-expected U.S. manufacturing data was released just recently. Although it is relatively difficult to see that there are tapering this year, this cannot be readily concluded especially given the fact that there are monthly U.S. jobs that are released available for all markets.
Prices are likely to trade within the recently established range with moderate risks skewed to the downside with the physical market setting a fragile environment and disinvestment is relatively still very low.
Moreover, the external markets are providing assistance to support gold as equity markets retain their foothold against the euro coupled with a softer 10-year U.S. failure to restructure investor interest despite steps in easing geopolitical tensions.
Finally, the Barclays Global Macro Survey which was published earlier this quarter revealed a 60 % of investors surveyed equities as the most profitable investment commodity in the following months as with the outperformance of stocks also weighing much on the interest in gold especially this year.