By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) -- Gold futures sank during Friday morning electronic trading in Asia, as strength in the U.S. dollar helped push prices for the precious metal down by as much as $19 an ounce, while traders continued to digest news on the International Monetary Fund's planned gold sale.
Gold for April delivery fell to an intraday low of $1,099.30 an ounce in electronic trading on Globex and recouped some of its losses to trade at $1,105.30, down $13.40, or 1.2%, by the late morning in Tokyo.
The contract had ended with a loss of $1.40 in New York Thursday after touching a low of $1,098.10.
Prices had come off their lows by the close of Thursday's trading session as investors picked up on thinking that central banks would likely buy the remainder of gold being sold by the International Monetary Fund, which on Wednesday said it plans to sell 191.3 tons of gold on the open market. See Thursday's metals story.
The IMF gold sales news is "not new news," said Peter Grandich, a metals writer at Agoracom.com, in a note to clients from late Wednesday.
"Even if this doesn't lead to someone or group buying part or all of the proposed amount, it's my understanding that the amount is going to be part of the already known agreed-upon amount the Washington Accord group had in its powers to sell anyway," he said.
And the IMF sales, "which have been less than what many first thought they would be anyway, have become almost non-factors," he said.
Fed surprise
Then, late Thursday in Washington, the U.S. Federal Reserve surprised financial markets by lifting the lending rate it charges banks. See story on U.S. fed move.
That provided support for the U.S. dollar, which in turn pressured prices for commodities. The Dollar Index (DXY 81.22, +0.82, +1.02%) ,which tracks the greenback against a trade-weighted basket of six major currencies, was up 0.1% to 81.21.
Gold's decline Friday in Asia is a "knee-jerk reaction" following the surprise rate move after New York markets closed, said Patrick Kerr, a managing director at Amerifutures Commodities & Options, adding that these after-hours trading markets "have nowhere near the liquidity [or] volume of regular Comex pit session" and that exacerbates the move.
"Once the market digests this, maybe tomorrow morning N.Y. time or so, we could see a huge rally late in the day or early next week," he said.
"This is the so-called 'boogey-man' that was going to crush gold [but it's] still above $1,100," he said.
Grandich's 2010 target for gold prices is $1,300 to $1,500 an ounce.
"Mark this time down," he said late Wednesday following the IMF news. "It will, in the not-too-distant future, be viewed as yet another buying opportunity in the 'mother' of all secular bull markets."
