Gold headed lower again as weak US inflation data and the surge in the dollar sparked more selling of the metal.
Pressure from a rising US currency sent gold to a four –year low on Friday, when the price fell by $40 at the peak of the selling.
The end to the Federal Reserve’s bond purchase programme last week served to highlight that the US is tightening its monetary stance as other regions, especially the eurozone, are set to loosen, sentiments that sent the dollar climbing. Gold is traditionally seen as a bet against the dollar.
Broker Commerzbank said the selling pressure stemmed from the futures market with the trading volume on the US clearing house Comex hitting a three-month high of 325,700 contracts on Friday, more than twice this year’s average.
Gold fans have hoped that any fall below US$1,200 would spark a revival in consumer buying but while this may be true in the US, physical demand in the more important Asian market is still subdued.
Traders said Chinese buyers expect the price to fall further and are holding back purchases in anticipation, without which Commerzbank said the price is likely to fall further.
On a brighter note, coin sales in the US climbed in October to 67,500 ounces, their highest level since January.
There was also a slight inflow into gold-backed exchange traded funds on Friday, though overall October was a poor month for gold ETFs.
According to Bloomberg, more than US$1.3bn left precious metals funds during the month, with the slide in the oil price adding to the weak sentiment as it has lowered inflation expectations even more.
An hour into trading on Wall Street, spot gold was US$3 lower at US$1,169, silver was trading at US$16.10 and platinum had added US$6 to US$1,237.
Major movers
Randgold Resources up 35p at 3,713p
Fresnillo unchanged at 698p
Anglo American up 3p at 1,319p