Gold futures continued their pullback after recently hitting a record high. The yellow metal has experienced a notable reversal, fueled by a strengthening US dollar. Although the Federal Reserve is expected to loosen monetary policy, gold prices could not sustain their upward momentum.
February gold futures tumbled $6.00, or 0.29%, to $2,036.20 per ounce at 17:39 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. Gold prices have risen more than 1% over the last week, adding to their year-to-date gain of 11%. Gold had hit an all-time high of $2,095.70 on Friday and had exceeded $2,100 in overnight trading on Monday before losing more than $100.
Silver, the sister commodity to gold, is also plunging on Tuesday. January silver futures plummeted $0.392, or 1.57%, to $24.515 an ounce. The white metal firmed above $26 before retreating. Year-to-date, silver prices are up 1.3%.
So, if the Federal Reserve is expected to cut interest rates early next year and there are tensions in the Middle East, why is gold not maintaining the momentum?
Many factors could explain the sizable dip. The first is that gold market conditions are overbought as the Relative Strength Index (RSI) was above 70 before the dramatic rally. The second component was that investors took profits while retail traders chased the gains. The final contributor could be the resurgence of the buck.
The US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, rose 0.32% to top 104.00 on Tuesday. The DXY has risen 1.25% over the last week and is up 0.5% on the year.
A stronger buck is bearish for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
Meanwhile, on the data front, the US labor market continues to slow as job openings fell to 8.733 million in October, down from a downwardly revised 9.35 million in September.
The S&P Global Composite and Services Purchasing Managers’ Index were roughly flat in November. The Institute for Supply Management’s Services PMI rose to 52.7 last month.
In other metal markets, January copper futures fell $0.0475, or 1.24%, to $3.788 per pound. January platinum futures declined $19.70, or 2.13%, to $905.40 an ounce. January palladium futures tumbled $34.70, or 3.54%, to $946.00 per ounce.