1st LD Writethru: Gold down on equities rally
Xinhua, January 23, 2016 Adjust font size:
Gold futures on the COMEX division of the New York Mercantile Exchange fell on Friday as U.S. equities rallied for the second day in a row.
The most active gold contract for February delivery dropped 1.9 U.S. dollars, or 0.17 percent, to settle at 1,096.3 dollars per ounce.
Gold was put under pressure as the U.S. Dow Jones Industrial Average rose by 1.06 percent as of 17:30 GMT. The two-day rally in U.S. equities comes after three weeks of losses. Analysts note that when equities post losses, the precious metal usually goes up, as investors are looking for a safe haven, while the opposite is true when U.S. equities post gains.
The precious metal was put under further pressure as a report issued by the U.S. Department of Commerce showed existing home sales increasing by 14.7 percent to a 5.46 million annualized rate during the month of December, an increase which analysts believe is much higher than expected. Year-on-year, sales have increased by 7.7 percent, with single-family homes leading the increase as they rose by 16.1 percent to a 4.82 million rate.
Gold was also dampened as the U.S. Dollar Index also rose by 0.39 to 99.51 as of 17:35 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
Analysts say the long-term trend for gold remains strongly bearish ahead of the Fed meeting next week. The Fed began the first of its interest rate hikes came in December, despite expectations for a delay until 2016. Some analysts believe that the Fed may increase its key interest rate at the next Federal Open Market Committee (FOMC) meeting in March. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest. Until the December FOMC meeting there had not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.
Silver for March delivery fell 3.7 cents, or 0.26 percent, to close at 14.057 dollars per ounce. Platinum for April delivery added 12.1 dollars, or 1.48 percent, to close at 831.6 dollars per ounce. Enditem