News Column

Gold Ends Lower On Global Cues, Rate Hike Uncertainty

August 25, 2014

WASHINGTON (Alliance News) - Gold futures ended a tad lower on Monday, tracking rising global equity markets amid uncertainty over rate hikes after Fed Chair Janet Yellen provided little clarity as to when a rate hike would happen in her address at the Jackson Hole Symposium last week.

Appetite for the precious metal waned after global equity markets moved higher, with investors turning to the riskier equity assets. European markets ended higher amid expectations of fresh stimulus from the European Central Bank, with sentiments also upbeat on Wall Street. As well, investors also kept a close on watch on the escalating geopolitical tensions.

Nonetheless, the precious metal rallied in the wake of some soft economic news from the US, with sales of new single-family homes in July dropping to its lowest in four months. Meanwhile, German business sentiment also weakened for a fourth consecutive month in August, to its lowest level in a year.

Yellen, who said that rate hikes could come sooner than expected if the US economic recovery is sustained, also stated that improvement in labor market conditions has been overstated.

Also speaking at the Jackson Hole Symposium last Friday, European Central Bank President Mario Draghi said the bank may come out with more stimulus in the event of a further drop in inflation.

Gold for December delivery, the most actively traded contract, dipped USD1.30 or 0.1% to close at USD1,278.90 an ounce on the Comex division of the New York Mercantile Exchange on Monday.

Gold for December delivery scaled an intraday high of USD1,281.60 and a low of USD1,276.10 an ounce.

On Friday, gold futures snapped a five-day losing streak to end higher after Federal Reserve Chair Janet Yellen's remarks at the Jackson Hole Symposium gave no indication about the timing of a rate hike. However, gold shed about 2% for the week.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 800.08 tons on Monday, from its previous close of 799.19 tons.

The dollar index, which tracks the US unit against six major currencies, traded at 82.52 on Monday, down from its previous close of 82.61 late Friday in North American trade. The dollar scaled a high of 82.59 intraday and a low of 82.45.

The euro trended higher against the dollar at USD1.3199 on Monday, as compared to its previous close of USD1.3196 late Friday in North American trade. The euro scaled a high of USD1.3210 intraday and a low of USD1.3186.

In economic news from the US, sales of new single-family homes in July dropped 2.4% from June to a seasonally adjusted annual rate of 412,000, the Commerce Department said Monday.

It was the slowest pace of new home sales in four months, as demand was relatively weaker in all regions except the South. Economists expected a reading of 432,000. July sales were down 4.3% from a year earlier.

From Europe, German business sentiment weakened for the fourth consecutive month in August to its lowest level in a year, as the escalating crisis in Ukraine and the resultant sanctions against Russia pose downside risks to the economic activity.

The Ifo business climate index dropped to 106.3 in August, the lowest since July 2013, from 108 a month ago, a monthly survey conducted by the Ifo institute among 7,000 firms showed Monday. The indicator was forecast to drop to 107 in August.

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Source: Alliance News

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