Gold (GC-FT1,081.70-1.90-0.18%) fell to a near three-month low on Thursday, hit by a stronger U.S. dollar and uncertainty over how U.S. President Barack Obama's proposal to limit risk taking by banks could affect gold trading.
Gold and other commodities have been under pressure since Mr. Obama last Thursday threatened to restrict some bank's most lucrative, and risky, trading operations, possibly including commodities.
He renewed his calls for robust Wall Street reform in his annual State of the Union address on Wednesday.
“Even more than the dollar's strength, there are a lot of worries about banks and big firm's ability to hold long positions,” said Zachary Oxman, managing director of California-based TrendMax Futures.
“There is a lot of money tied up in buying gold, and you are seeing a lot of money come off the table now, as people are willing to take less risk at this point,” he said.
Spot gold hit a low of $1,073.75 (U.S.), the weakest since Nov. 3. It was at $1,087.20 an ounce at 2:51 p.m. ET, against $1,087.25 late in New York on Wednesday.
U.S. April futures settled down 90 cents at $1,084.80 an ounce on the Comex division of the New York Mercantile Exchange.
On charts, gold futures held key support at their 100-day moving average at $1,087 per ounce, but further decline could lead to a test of the $1,060 area, seen as support where prices topped out on the way up last October, analysts said.
The euro fell to its lowest level in more than six months versus the dollar as U.S. data and fears over the outlook for a number of smaller euro zone economies pressured higher-yielding currencies.
Gold prices have declined some 4 per cent in the last two weeks as the dollar rallied, with fears over Greece's fiscal situation and waning risk appetite lifting the U.S. unit at the expense of higher-yielding currencies.
“Currencies are clearly guiding the immediate direction of the precious metals, especially after fresh trouble brewing in Portugal, Italy, Greece, [and] Spain now, which threatens to undermine the health of the common currency,” said Pradeep Unni, senior analyst at Richcomm Global Services.
Gold was part of a broad commodities selloff. The Reuters-Jefferies CRB index tumbled on Wednesday, hitting seven-week lows as the dollar's advance hurt prices of commodities.
Silver (SI-FT16.230.020.14%) rose to $16.25 against $16.54.
Platinum (PL-FT1,507.5013.600.91%) and palladium (PA-FT417.504.151.00%) rebounded after hitting their lowest levels since early January Wednesday, when sentiment deteriorated after news that Toyota Motor Corp., the world's biggest auto maker, is to suspend U.S. sales of eight models due to a safety recall.
Platinum and palladium are exposed to the auto sector, mainly used in catalytic converters.
Platinum was up at $1,512.50 against $1,502.50, while palladium was at $419 against $411.50.
A Reuters poll published on Wednesday showed platinum and palladium are expected to outperform other precious metals this year, with a new wave of investor demand boosting prices in anticipation of increased industrial use.
