News Column

Gold Ends At USD1,265 With Focus On ECB

September 2, 2014

WASHINGTON (Alliance News) - Gold futures ended plunged to end lower on Tuesday, as the dollar strengthened after some upbeat economic data from the US with manufacturing activity rising better than expected in July, while construction spending also rebounded more than anticipated.

The US dollar made gains as expectations the European Central Bank will announce monetary stimulus later this week contributed to the decline of gold.

Activity in the US manufacturing sector unexpectedly grew at an accelerated rate in the month of August, according to a report released by the Institute for Supply Management on Tuesday, with the index of activity in the sector climbing to a three-year high. Meanwhile, construction spending in the US rebounded more than expected in July, after reporting an unexpected drop in spending in the previous month, a Commerce Department released showed Tuesday.

Geopolitical tensions were also in focus with the EU and the US reportedly close to announcing fresh sanctions against Russia for its role in the Ukraine crisis.

Gold for December delivery, the most actively traded contract, plummeted USD22.4 or 1.7% to close at USD1,265.00 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday.

Gold for December delivery scaled an intraday high of USD1,290.90 and a low of USD1,263.10 an ounce.

On Friday, gold futures had ended lower as some buoyant US data lifted the greenback, with gold gaining about 0.4% for the week.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged down to 795.00 tons on Tuesday from its previous close of 795.60 tons on Friday.

The dollar index, which tracks the US unit against six major currencies, traded at 82.95 on Tuesday, up from its previous close of 82.79 late Friday in North American trade. The dollar scaled a high of 83.04 intraday and a low of 82.75.

The euro trended higher against the dollar at USD1.3131 on Tuesday, as compared to its previous close of USD1.3129 late Friday in North American trade. The euro scaled a high of USD1.3137 intraday and a low of USD1.3110. In economic news from the US, the Institute for Supply Management on Tuesday said its purchasing managers index jumped to 59.0 in August, with the index of activity in the manufacturing sector climbing to a three-year high from 57.1 in July. A reading above 50 indicating growth in the manufacturing sector. Economists expected the index to edge down to 56.8. The manufacturing index was at its highest since reaching 59.1 in March of 2011.

Meanwhile, construction spending in the US jumped 1.8% to an annual rate of USD981.3 billion in July after falling by 0.9% to a revised USD963.7 billion in June, a Commerce Department report showed. Economists expected spending to increase by about 1.0% compared to the 1.8% drop originally reported for the previous month.

From Europe, U.K 's construction activity grew at a faster pace in August, defying expectations of a slow down, a a survey by Markit Economics and the Chartered Institute of Purchasing & Supply, or CIPS, showed Tuesday. The Markit/CIPS construction purchasing managers' index rose to 64 in August from 62.4 in July. Economists expected the index at 61.5. This marked the fastest rate of increase since January and the second-strongest rate of expansion since the pre-recession peak of August 2007.

From the eurozone, prices of goods from euro zone factories resumed their decline in July, putting further pressure on the European Central Bank to announce monetary stimulus at this week's meeting. Producer prices fell 0.1% from June, and were down 1.1% from July 2014, according to the EU's statistics.

During the week, traders will be looking ahead to a slew of economic reports including the US non-farm payrolls data for August. The private sector employment report from ADP and weekly jobless claims data are also awaited.

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Source: Alliance News

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