Gold, Silver Fall Most in a Week on Dollar Rally, Fed Outlook

Jan 07, 2014 3:00 pm ET

Jan. 7 (Bloomberg) -- Gold and silver futures fell the most in a week on the dollar’s rally and the outlook for less U.S. monetary stimulus.

The greenback rose for the fifth time in six sessions against a basket of 10 major currencies as government data showed the U.S. trade deficit shrank more than forecast in November. Tomorrow, the Federal Open Market Committee will release minutes of last month’s meeting, when they decided to taper asset purchases.

“People want to know how serious the Fed is about easing, and tomorrow more details will come out,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “The dollar strength is also working against gold.”

Gold futures for February delivery fell 0.7 percent to settle at $1,229.60 an ounce at 1:42 p.m. on the Comex in New York, the biggest drop for a most active contract since Dec. 30.

Yesterday, the price settled less than 0.1 percent lower after plunging by more than $30 in about a minute, spurring a 10-second trading pause.

In 2013, gold tumbled 28 percent, the most since 1981 and the first annual drop since 2000. Some investors lost faith in the metal as a store of value amid an equity rally and muted inflation.

The metal climbed 2 percent last week. Trades linked to a rebalancing of the Dow Jones-UBS Commodity Index may result in 1.49 million ounces of gold demand this week and 44.27 million ounces of silver purchases, UBS AG estimated.

Silver futures for March delivery dropped 1.6 percent to $19.787 an ounce on the Comex, the biggest decline since Dec. 30.

On the New York Mercantile Exchange, platinum futures for April delivery fell 0.1 percent to $1,415.40 an ounce. The metal climbed in the previous four sessions, the longest rally in 10 weeks.

Palladium futures for March delivery rose 0.4 percent to $741.70 on the Nymex. The price gained for fifth straight session, the longest rally since Oct. 22.

--With assistance from Nicholas Larkin in London. Editor: Patrick McKiernan