Gold's midweek gains were undone in a hurry overnight as the roller-coaster pattern continued amid the standoff developing between the Fed and dollar bears.
Depressed by a surging (up .64 to 73.87 on the index) US dollar and a $3 slide in crude oil (to $133.50) the precious metal gave back all of yesterday's gains and fell to a low of $864 ahead of the New York opening this morning.
Strong anti-inflation rhetoric from the Fed's Mr. Plosser (he said "interest rates will have to rise) augmented expectations of US interest rate hikes and pushed their possible date of enactment closer to the present. Adding to the dollar's rise were reports expecting retail sales in the US to show a decent gain in the wake of stimulus cheques which were mailed to US taxpayers finding their way into store cash registers in lieu of bank savings accounts as some had expected.
New York spot trading opened with a $15 (1.72%) loss, quoted at $865 bid per ounce, as players reevaluate the possibility that this could be the week (or indeed, the day) during which gold breaks through the $863 low and heads towards the $850 critical support area.
We now look for this break to materialize shortly. The gain in retail sales (up 1% to the strongest level in six months) adds to the case being made for a hike in interest rates. Initial jobless claims moved higher, adding 25,000 individuals to those filing for benefits and import prices rose 2.3% due largely to oil values.
The US dollar broke through the 74 level shortly after the retail numbers hit the wires. Silver was off 50 cents to $16.38 while platinum lost $38 to $2005 and palladium fell $2 to $423 per ounce. Gold's losses widened to $21 and hit a low of $859.50 within five minutes of the retail figures' release. The markets are now pricing in a 125 basis point rate hike by this time next year.
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