Gold futures fell sharply Tuesday to end at their lowest level in nearly four weeks, as strength in the dollar and a rally in U.S. equities lured investors away from the precious metal.
“Risk appetite is continuing to pressurize gold,” said Mark O’Byrne, executive director at bullion dealer GoldCore, but the metal’s fundamentals remain sound and “smart money will continue to buy on the dip.”
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Gold for June delivery GCM3 -0.29% dropped $25, or 1.6%, to settle at $1,575.90 an ounce. That was the lowest settlement for a most-active contract since March 7, FactSet data show.
It was just a day earlier that gold reclaimed the $1,600 an-ounce level, rising $5.20, or 0.3%, to settle at $1,617.90 an ounce, feeding off weaker-than-expected U.S. manufacturing data.
On Tuesday, investors grappled with a clutch of downbeat European data, including figures showing a deeper factory downturn in March, which drove the euro EURUSD -0.02% south against the dollar. The greenback also climbed as the Japanese yen USDJPY +0.08% weakened ahead of a Bank of Japan policy meeting.
Whereas a weaker dollar provides support for prices of dollar-denominated commodities such as gold and oil, a stronger dollar works in the opposite direction. The ICE dollar index DXY +0.04% traded at 82.877, up from 82.744 late Monday in North American trading.
The recent tight trading range and the Easter holiday likely moved gold prices closer to the levels traders have set for automatic sell orders, according to Gene Arensberg, editor of the Got Gold Report, which provides technical analysis of the gold and silver markets.
U.S. equities rallied on positive news about Medicare reimbursement rates, a rise in factory orders for February and upbeat figures on March auto sales. That helped draw interest away from gold.
In a report Tuesday, analysts at Société Générale reiterated their bearish stance on gold prices. Their base-case 2013 forecast is for $1,500 an ounce on average, with a drop to $1,375 an ounce by the year’s end.
Among the major Comex metals, silver, which is known for its volatility, led the charge lower. May silver futures SIK3 -0.27% sank 70 cents or 2.5%, to end at $27.25 an ounce, the lowest level for a most-active contract since early August.
Silver hit a “very key” $27.50 price point — likely an indication of the “bearish environment” for the metal, analysts at Lido Isle Advisors wrote in a note Tuesday, adding that the next key target lower is $25.
“It seems that as the U.S. equity markets rise, more investors are liquidating their precious-metals holdings and perhaps shifting into the ‘great rotation’ into equities,” they said.
May copper futures HGK3 -0.58% finished up less than half a cent, or 0.1%, at $3.38 a pound.
July platinum PLN3 -0.29% tumbled $24.60, or 1.5%, to $1,574.20 an ounce, and June palladium PAM3 -0.66% fell $14.55, or 1.9%, to $769.40 an ounce. Prices pulled back from gains seen on Monday, when platinum and palladium climbed 1.5% and 2%, respectively.