On Tuesday, gold suffered its worst trading day since late March as exceptional housing numbers in the US put a June rate hike by US Federal Reserve firmly back on the table. It would only be the second interest rate increase in the US in a decade and expectations of more aggressive monetary policy also boosted the dollar, which usually moves in the opposite direction to the gold price.
In heavy trading of nearly double usual volumes gold futures in New York for delivery in June, the most active contract, closed near its lows of $1,228.30 an ounce. Gold has been losing ground steadily since hitting a 15-month high above $1,300 an ounce at the end of April but remains up nearly 16% in 2016.
Gold futures on the COMEX division of the New York Mercantile Exchange fell on Tuesday as good U.S. data boosted U.S. equities.
The most active gold contract for June delivery fell 22.30 U.S. dollars, or 1.78 percent, to settle at 1,229.20 dollars per ounce.
After four weeks of gaining on weakened U.S. equities, the precious metal was put under extensive pressure as the U.S. Dow Jones Industrial Average rose by 208 points, or 1.19 percent as of 17:30 GMT. Analysts noted 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 U.S. dollar also put pressure on gold as the U.S. Dollar Index rose by 0.37 percent to 95.60 as of 17:30 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.
A report released by the U.S. Census Department showed new home sales increasing at the highest level since January 2008, with new home sales increasing to an annualized rate of 619,000 during the month of April, with the two prior months being revised upward to a net of 39,000 sales. Analysts noted that this was much better-than-expected and put pressure on the precious metal and gave support to U.S. equities markets.
Traders are waiting for the international trade in goods report due on Wednesday, durable goods and weekly jobless claims on Thursday, and the U.S. gross domestic product report on Friday.
Technically, June gold futures prices closed near the session low today. The gold still bulls have the slight overall near-term technical advantage but have faded badly and need to show fresh power soon. Prices are in a three-week-old downtrend on the daily bar chart. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,270.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at 1,200.00. First resistance is seen at $1,240.00 and then at $1,250.00. First support is seen at today’s low of $1,228.00and then at $1,225.00. Wyckoff’s Market Rating: 5.5
Reference: Xinhua, Kitco, Mining
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