Gold slips further from record high, dollar firms

hawkish comments from a Federal Reserve official late last week, and as impetus from violence in the Middle East petered out.
Spot gold was bid at US$1 417,79 an ounce at 0902 GMT, against US$1 427,75 late in New York last Friday.
US gold futures for April delivery fell US$8,00 an ounce to US$1 418,20. The precious metal rallied to a record US$1 447,40 an ounce last week as violence that flared in the Middle East and North Africa and re-emerging sovereign debt concerns in the euro zone prompted risk-averse buying of gold. But it struggled to maintain traction at that level.
“There was a lot of bad news already in the price, and further gains were always going to be hard won,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia.
“The dollar firmed up on Friday, and everything seems to have shifted back towards the dollar, with the fears in Europe. We can fall back to US$1 400, maybe even a bit below, and it still looks good overall. There is still a lot of uncertainty out there,” he added.
“But unless there are more black swan events out there, I think gold will struggle on the upside.”
The euro slipped versus the dollar early yesterday after German Chancellor Angela Merkel’s conservatives lost a key state election. A consequently stronger dollar pressured gold, which becomes more expensive for other currency holders as the US unit appreciates. The dollar benefited from comments late last week from Federal Reserve official Charles Plosser, who said the central bank will have to reverse its easy money policy in the “not-too-distant future” to avoid inflation. Prospects that US monetary policy may tighten are usually seen to be negative for gold as a non-interest bearing asset. Elsewhere German government bonds opened lower after the election rout of Merkel’s conservatives, while US Treasuries eased as investors upped interest rate hike bets.
Portuguese bonds meanwhile remained under pressure as the country faced snap elections, which could make it difficult for Lisbon to finance itself ahead of bond redemptions in April and June.
VTB Capital analyst Andrey Kryuchenkov said rising concerns over Portugal’s debt are likely to limit gold’s downside.
“It seems that this additional support to bullion prices is unlikely to dissipate into (the second quarter) and is likely to keep the downside limited should we correct lower on easing tensions in the Middle East, North Africa region,” he said. — Reuters.