New York gold futures took a downturn from its record territory as some investors took money off the table after the metal rose for the six-straight days and pushed past $1430/oz.
The dollar index also recovered some of its lost grounds which further weakened the bullion prices.
Key Observations
Gold futures for February-delivery closed 0.50% down at $1409/oz. Prices fell from the session high of $1432.50/oz, the new all-time high on COMEX.
The dollar index rebounded for the second day in a row and closed at 79.934 levels, +0.46%.
U.S. equities rose after Obama extended Bush-era income tax cuts for two years which will help middleclass American spend more. At the same time, this willput further pressure on Federal deficit. The benchmark MSCI World Index for stocks gained 0.37%.
Total exchange-trade gold holdings increased by 0.96 MT to 1618.70 MT while SPDR gold holdings were down at 1297.73 MT yesterday.
MCX gold futures for February-delivery also saw similar fall in line with COMEX gold futures by closing down by 0.50% to `20679/10 gm yesterday. Rupee was another reason behind this fall in domestic bullion prices as the Indian unit gained 0.7% to 44.6450/USD in spot markets and lowered the parity price.
Outlook
International gold futures are heavily down by nearly $17/oz to $1393/oz in Asian sessions as the dollar index rose after yield on U.S. Treasuries rose the most since June 2009, after Obama extended tax-cuts which will raise the government deficit.
Government bond prices dropped after the first of three bond auctions this week saw weak response. Yield on 10-year notes rose by nearly 20 basis points to 3.17%.
The greenback benefitted from extended tax-cut plan, which sent U.S. Treasury bond yields higher and thus, making the currency more attractive. Stronger currencies are making precious metals to take a correction after having seen steep rise in the last few days.
Asian equities are also trading mixed. Today’s economic data in the form of improving industrial production in Germany may take some profits away from the dollar and help the bullion price recover to a certain extent. Overall, precious metals are expected to remain weak for the day.
