MW: Gold turns down after housing data as dollar rises
NEW YORK (MarketWatch) -- Gold futures fell on Thursday, reversing early 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 $6, or 0.6%, at $1,008.50 an ounce on the New York Mercantile Exchange.
The 2.7% decline in existing-home sales, to an annualized pace of 5.10 million, caught 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.
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 data, the dollar index (DXY 76.64, +0.60, +0.78%) , which measures the U.S. unit against a basket of six major currencies, rose to 76.558, 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 9,704, -44.81, -0.46%) lately down about 0.5%, struggling to hold at the 9,700 level.
Meanwhile, the SPDR Gold Trust (GLD 97.86, -0.97, -0.98%) , the biggest gold exchange-traded fund, fell 1.2%.
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 16.5 cents, or 2.7%, to $16.47 an ounce and October platinum declined $18.10, or 1.4%, to $1,309.70 an ounce. December palladium fell $1.25, or 0.4%, to $296.45 an ounce.
December copper dropped 9 cents, or 3.2%, to $2.72 a pound.
