Gold Sinks to Lowest in a Month as Dollar's Rally Blunts Allure

Gold has been thrown onto the defensive by a resurgent dollar, sinking to the lowest in more than a month as the U.S. currency’s rally hurts the allure of the metal that’s been the best-performing commodity of 2016.

Bullion for immediate delivery fell as much as 0.7 percent to $1,208.38 an ounce, the lowest since Feb. 23, and traded at $1,211.28 at 11:35 a.m. in Singapore, according to Bloomberg generic pricing. The metal retreated 3.1 percent last week, the most since November, and it’s headed for the first monthly drop of 2016 after surging 11 percent in February.

Gold’s rally this year has been cut to 14 percent as a gauge of the dollar heads for the longest stretch of gains since January on the outlook for tighter U.S. monetary policy. Data on Friday showed the world’s largest economy expanded more than previously estimated, adding to the case for higher rates. Investors will this week scrutinize figures including pending home sales, consumer confidence and Friday’s March jobs report that’s forecast to show a gain of 208,000, according to a Bloomberg survey of economists.

‘Lot of Light’

“The data can throw a lot of light on what the FOMC will possibly do in April,” Gnanasekar Thiagarajan, director of Mumbai-based Commtrendz Risk Management Services Ltd., said by phone, referring to the Federal Open Market Committee’s next policy meeting on April 26-27. “The dollar strength will pressurize gold” this week, he said.

Investors will also be watching a speech from Federal Reserve Chair Janet Yellen on Tuesday, when she’s due to speak at an event hosted by the Economic Club of New York. In the runup to next month’s FOMC gathering, Yellen has stressed that every session is a “live possibility” to raise rates.

Gold’s renewed weakness is line with the outlook from bears including Goldman Sachs Group Inc., which has stuck with its forecast for a slump even as the metal gained this year. The bank gave a near-term target for $1,100 in a March 7 note, citing prospects for further strengthening of the U.S. economy.

While prices have been dropping, investors have continued to expand their holdings in bullion-backed Exchange -traded funds. The assets rose for an eighth day to 1,770.5 metric tons on March 24, the highest level since December 2013, according to data compiled by Bloomberg.

In China, bullion of 99.99 percent purity fell 0.8 percent to 254.14 yuan a gram ($1,212.18 an ounce) on the Shanghai Gold Exchange. On global markets, spot silver was little changed at $15.175 an ounce and platinum was steady at $948.20 on ounce while palladium added 0.3 percent to $577.40 an ounce.

To contact the reporter on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Jake Lloyd-Smith, James Poole

By: Ranjeetha Pakiam

©2016 Bloomberg News