Pro Trader’s views on the Markets

 

Gold logs 2nd losing session in a row

 

NEW YORK (June 9) Gold futures dropped more than $5 an ounce Wednesday to log a second day of losses, with the U.S. dollar finding support after Federal Reserve Chairman Ben Bernanke acknowledged slow U.S. economic growth but made no reference to any further stimulus package.

 

The U.S. dollar index rally likely contributing to a lack of buying interest for gold. The gauge, which tracks the performance of the greenback against a basket of other major currencies, was lately at 73.873, up from 73.528 late Tuesday. Read more about currencies action.

 

Yen’s rise continues, as do fearsThe run higher for Japan’s currency adds more complications as the country recovers from the devastating March earthquake and tsunami.

 

“Gold prices were largely governed by the movements in the dollar,” said analysts at ICICI Bank, in a note to clients. The comments from Bernanke supported the greenback, “thereby leading to a decline in prices of the yellow metal.”

 

Gold for August delivery, the most active contract, fell $5.30, or 0.3%, to settle at $1,538.70 an ounce on the Comex division of the New York Mercantile Exchange.

 

Silver for July delivery dropped 43 cents, or 1.2%, to finish at $36.62 an ounce.

 

Speaking Tuesday afternoon, Bernanke said that the U.S. economy will improve in the second half of the year but that progress is slow. “Accommodative” monetary policies are still needed, he said, while stopping short of suggesting additional quantitative easing, which could have provided a boost for commodity prices. Read the text of Bernanke’s speech.

 

Bernanke was “fairly cautious on the economic outlook [but] didn’t throw out any bones for commodity, foreign exchange or equity markets to latch onto,” said Simon Smith, chief economist at FxPro.

 

“Bernanke is all too aware of the self-fulfilling momentum that could build around expectations for further QE and at this point in time, he does not want to light the touch-paper,” he added.

 

Gold’s losses Wednesday came as prices for crude oil rallied on the back of the Organization of the Petroleum Exporting Countries’s surprising decision to leave production quotas unchanged. Read about oil and OPEC.

 

Fundamentally for gold, however, nothing is new, said Darin Newsom, senior analyst at Telvent DTN. Bernanke’s comments “regarding the still weak economy should provide gold long-term support.”

 

For now, other metals tracked gold lower, with July copper down 4 cents to end at $4.11 a pound. September palladium lost $3.80 to close at $805.70 an ounce and July platinum closed at $1,831.20, down 50 cents.

 

Looking ahead, the direction of the Japanese yen may offer a clue on gold’s next move.

 

“Gold’s alternative currency ecosystem is highly dependent on the U.S. dollar’s exposure to inflation and the direction of the yen,” said Richard Hastings, a macro strategist at Global Hunter Securities, explaining that the yen’s current strength signals a pause in demand for gold as an alternative currency.

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