Gold Drops From Three-Week High as Dollar, Global Equities Rally

  • U.S. dollar heads for biggest increase in more than six weeks
  • China trade data spurs recovery hope as Fed mixes its messages

Gold fell from the highest in more than three weeks as gains in global equities and the dollar reduced demand for the metal as a haven.

A measure of global shares erased losses for 2016 after data showed China’s exports jumped the most in a year, adding to evidence of stabilization in the world’s second-biggest economy. The dollar headed for its biggest gain in more than six weeks against a basket of 10 currencies.

Gold has risen 18 percent this year after volatility in equities and concerns on China’s growth at the start of the first quarter boosted demand for the metal as a haven. Gains for bullion have slowed since early March amid optimism for improved prospects on equity markets and China’s economy.

“Definitely the boost in the dollar and strength in equities will put pressure on the gold market,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview.

Gold futures for June delivery slid 1 percent to settle at $1,248.30 an ounce at 1:50 p.m. on the Comex in New York. The metal capped its first loss in five sessions after reaching $1,264.70 on Tuesday, the highest since March 18.

Philadelphia Federal Reserve President Patrick Harker and Dallas Fed chief Robert Kaplan on Tuesday echoed Chair Janet Yellen’s call that policy makers should err on the side of caution, boosting expectations that officials won’t raise interest rates when they meet on April 26-27. San Francisco Fed President John Williams said two to three rate rises in 2016 is reasonable. Lower rates are a boon to gold because it doesn’t offer yields or dividends, unlike competing assets.

“Fed officials have been giving mixed comments,” Madhavi Mehta, an analyst at Mumbai-based Kotak Commodity Services Ltd., said by e-mail. “This could be an additional reason for a correction.”

In ETFs and other metals:

  • Holdings in exchange-traded funds backed by gold climbed 1.3 metric tons to 1,765.7 tons on Tuesday, according to data compiled by Bloomberg.
  • Silver futures for May delivery added 0.6 percent to $16.325 an ounce on the Comex.
  • On the New York Mercantile Exchange, platinum advanced, while palladium declined.
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