Precious metal under $1,000 amid broad pullback for metals futures
Gold slumps after weak U.S. home-sales data
NEW YORK (MarketWatch) -- Gold futures fell below $1,000 on Thursday, reversing earlier gains, as stocks fell and the dollar firmed after the National Association of Realtors said existing-home sales dropped in August, the first monthly drop in five months.
Gold for December delivery was down $16.70, or 1.7%, at $1,002.00 an ounce on the New York Mercantile Exchange. It earlier rose to an intraday high of $1,021 an ounce, and fell to a low of $994.
A slide in crude oil futures also pressured gold, reducing its appeal as an inflation hedge. Crude oil for November delivery tumbled 4% on concerns over rising inventories. See Futures Movers.
Aside from Thursday's weakness, analysts at Commerzbank say the price of gold remains supported by the festive and wedding season just started in India.
"This "usually goes hand in hand with stronger physical demand for gold [and] should initially prevent a slump in the price of gold," they said.
Existing home sales dropped 2.7% to an annualized pace of 5.10 million in August, catching economists by surprise. The median forecast by economists surveyed by MarketWatch was for a small gain to a 5.40 million annual rate, up from 5.25 million in July. See full story.
Gold futures earlier received a lift on Thursday, as investors took comfort in the Federal Reserve's upbeat assessment of the U.S. economy and its pledge to continue to provide ample liquidity, leading investors to embrace more risk-taking and putting pressure on the dollar.
But after the housing data, the dollar index (DXY 76.68, +0.63, +0.83%) , which measures the U.S. unit against a basket of six major currencies, rose to 76.738, up from 76.377 in late New York trade Wednesday.
The U.S. currency has been used as a safe haven since the financial crisis, and it has now slumped to one-year lows as the stock market has rallied since March. But when the dollar firms, it tends to boost dollar-denominated commodities, and also reduces the value of gold as an alternative asset.
U.S. stocks came under pressure after the housing data, with the Dow Jones Industrial Average (INDU 9,697, -51.39, -0.53%) lately down about 0.5%, struggling to hold at the 9,700 level.
Meanwhile, the SPDR Gold Trust (GLD 98.02, -0.81, -0.82%) , the biggest gold exchange-traded fund, fell 1%.
Ted Scott, a metals analyst at F&C, takes comfort in continued investment demand for gold, however.
"It is noteworthy that despite the impact of the recession reducing demand for jewelry and industry by 20%, this is more than offset by an estimated 46% increase in investment demand for gold," he said in a note.
Earlier, gold rose and the dollar came under pressure after signs that U.S. employment continues to fall at a slower pace. Initial claims for unemployment benefits fell 11,000 to 530,000 in the latest week, the Labor Department said. See Currencies.
On Wednesday, the Fed, as expected, left ultra-low interest rates unchanged. It also extended the timeframe of existing programs to buy mortgage-backed securities and agency debt through March, just as it did with its Treasury purchases back in August.
Among other metals, December silver sank 58 cents, or 3.4%, to $16.33 an ounce and October platinum declined $18.10, or 1.4%, to $1,309.70 an ounce. December palladium fell $2.15, or 0.7%, to $295.50 an ounce.
December copper dropped 9 cents, or 3.1%, to $2.72 a pound.
"Metal prices have actually fared quite well in the face of a strong slump in the price of crude oil and a firmer U.S. dollar," Commerzbank said. "In the case of copper, the spotlight should be on the strike at the Chilean mine."
Union workers at BHP Billiton's (BHP 64.11, -1.52, -2.31%) Spence copper mine in Chile on Wednesday are expected to reject a contract offer and vote to strike, Reuters reported.
