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Gold down 1 percent on stronger U.S. dollar, equities

Xinhua, April 14, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as stronger oil prices led a rebound in U.S. equities and the U.S. dollar, despite worse-than-expected U.S. data.

The most active gold contract for June delivery fell 12.6 U.S. dollars, or 1 percent, to settle at 1,248.30 dollars per ounce.

Gold was put under pressure as the U.S. Dollar Index, a measure of the dollar against a basket of major currencies, rose by 0.76 to 94.77 as of 1810 GMT. 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.

Gold was put under further pressure as the U.S. Dow Jones Industrial Average rose by 178 points, or 1 percent, as of 1810 GMT. 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.

Traders are carefully monitoring the market's reactions to two reports released on Wednesday.

A report released by the U.S. Census Department showed retail sales fell by a worse-than-expected 0.3 percent in March, as analysts noted that auto sales were weak, as well as the rest of the country's retail sales.

Gold was prevented from falling further as the U.S. Department of Labor reported the producer price index also fell by a worse-than-expected 0.1 percent, a sign of deflationary moves.

Analysts note that this measure is carefully watched by the U.S. Federal Reserve for inflation, as controlling inflation is one of the Fed's mandates.

Considering these two new reports, traders believe that the Fed may raise rates from 0.50 to 0.75 during the July FOMC meeting.

According to the CMEGroup's Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 18 percent at the June 2016 meeting, and 30 percent at the July 2016 meeting.

Silver for May delivery rose 10.3 cents, or 0.63 percent, to close at 16.325 dollars per ounce. Platinum for July delivery added 3.3 dollars, or 0.33 percent, to close at 1,003.00 dollars per ounce. Endit