London: Gold hit a one-month low yesterday on a firmer dollar and weaker oil prices, with investors unwinding their trading positions ahead of this week’s Federal Reserve meeting on interest rates.
Gold often takes its cue from movements in the dollar because of its role as an alternative investment to currencies, stocks and bonds.
The outcome of the Fed meeting would set the tone for currencies and precious metals, dealers said.
“Strength in the dollar is clearly a major factor, plus we have seen a quite bit of money coming out of the StreetTRACKS exchange-traded fund. Both these things are weighing on the market,” said Dan Smith, analyst at Standard Chartered Bank.
Gold held in StreetTRACKS Gold Shares, the world’s largest gold-backed ETF, fell more than 50 tonnes in less than a week to about 591 tonnes as of Monday.
Spot gold fell as low as $874.90 an ounce and was quoted at $879.10/$879.80 at 1430 GMT, against $891.65/$892.65 late in New York on Monday, when it hit an intra-day day high of $895.50 on speculative buying driven by record high oil.
“It is following the currency and taking its lead from oil. $880 is an important area. If we hold here, then we are fine,” said Peter Hillyard, head of metals sales, ANZ Investment Bank.
The dollar briefly extended gains against the euro yesterday after US consumer confidence in April came in broadly in line with market expectations.
The euro deepened losses against the dollar to $1.5568 from $1.5590, but moved back to where it was before the data’s release. Against the yen, the dollar edged up to 103.96 from 103.80 yen previously.
Oil fell more than $2 a barrel yesterday, retreating further from a record high hit a day before, as the dollar firmed and a strike ended at Britain’s Grangemouth refinery.
Resumption of talks between Nigerian unions and Exxon Mobil to end a six-day strike that has shut in much of the US oil major’s Nigerian output. US light crude for June delivery fell $2.20 to $116.55 a barrel by 1511 GMT. London Brent crude was down $2.34 at $114.40.
Other precious metals also fell, with spot platinum slipping more than one per cent to $1,941/$1,951 from $1,964.50/$1,974.50 late on Monday.
Silver fell to $16.65/16.70 from $16.96/$17.02 an ounce, while palladium dropped to $428.50/$433.50 an ounce from $432.50/$438.50 in the US market late on Monday.