On Wednesday, gold prices pulled back with the metal, viewed as a hedge of inflation, made a leg down after reports indicated that inflation is still tame.
December delivery gold dropped 0.5% or $6.30 to $1,245 per ounce. The metal has started pulling back after it rose on Tuesday to new levels, which were last seen in September and analysts suggest that it is catching breath after advancing.
Market Watch quoted CMC markets chief market strategist Colin Cieszynski as having said, “Gold ran into resistance near $1,255 and has dropped back in a normal trading correction.”
The US labor department report on Wednesday showed that US consumer prices have risen slightly over the last month due to the high prices for housing and food but the inflationary pressures continue.
The dollar advanced against the euro while the ICE Dollar Index rose 0.5% at 85.69, increasing the pressure on gold. Gold is usually traded in dollars and has become expensive for the investors using different currencies.
Vision Financial Markets LLC director of metals, Dave Merger said, “We’ve seen a small resurgence in the dollar, which is bringing some pressure to the gold market.”
Merger added that the losses of gold were subdued considering the current rebound in the US equities, thus highlighting the lasting appeal of the precious metal.
According to the Wall Street Journal, the evidence of the greater demand for gold in India is also limited to the slide in prices for futures. The government of India has increased the import taxes and fees for gold to reduce the current account gap. Exports for Swiss gold have almost doubled in September since August.
Analysts at Commerzbank said that this suggests an increase in demand before the current festive season. Giving gold as a gift is an honored tradition for religious and wedding festivals in India. India is the second largest global importer of gold, behind top consumers of gold, China.
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