Gold continues to be pressured by a strengthening Dollar. After a resolute European trading session on Monday, the yellow metal dipped below $1,100 and closed the day near $1,096. As the volume continues to drop out of global markets ahead of the Christmas break, 3-month gold futures slipped a further $2 lower as the Dollar Index remains unchanged this morning.
Commentators and analysts have generally pointed to profit taking, as a stabilising Dollar has provided ‘in-the-money’ bulls to liquidate the positions following the quarter's golden rally, which peaked at $1,226. Over recent sessions the dollar has also benefited from concerns of instability in the Eurozone, with Moody’s beccoming the latest ratings agency to downgrade Greek government debt.
Gold’s rise from $750/ounce a year ago was driven primarily by growing fears over inflation and specifically the decline of the US Dollar. The greenback's decline has increased the relative appeal of physical assets, particularly gold, to protect against further devaluation.
Gold and the US Dollar have a directly inverse relationship; typically a fall in the dollar will prompt an increase in value for gold and vice-versa. Like all major commodities gold is primarily priced in dollars, therefore a change in relative value of the dollar directly impacts on the commodity's relative value. Crucially, when the dollar is weak, international dollar reserves devalue, subsequently central banks increase their demand for alternative assets such as gold.
In an equally quiet trading session the silver futures fell just 3 cents to $17/ounce, Platinum futures also dipped marginally in light seasonal volumes.
Precious metals inched higher after falling overnight as gold climbed to US$1,093/oz, while silver got back above US$17/oz. Platinum was unmoved at US$1,415/oz.
Mining stocks were mixed today. Platinum producer Lonmin (LSE: LMI) led the sector in the FTSE 100, climbing 1.2%, while gold miner Randgold Resources (LSE: RRS) and silver producer Fresnillo (LSE: FRES) were flat.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) also did well, adding 1.2%.
Midcap silver producer Hochschild Mining (LS:E HOC) was at the bottom of the pile with a 2% slide. Gold miner Petropavlovsk (LSE: POG) moved along with a marginal loss, while Aquarius Platinum (LSE: AQP) remained at the opening level.
African focused nickel and gold exploration and development junior Nyota Minerals (AIM & ASX: NYO) and Uzbekistan focused gold miner Oxus Gold (AIM: OXS) were among the top performers in the sector with gains of 3.5%.