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Gold reaches four-month low, as stronger dollar causes massive sell-off

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Investing.com -- Gold prices dipped to a four-month low on Tuesday, as the U.S. Dollar reached a 12-year high triggering a massive sell-off on global markets.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery slid 7.90 or 0.68% to $1,158.60 a troy ounce. The slide comes several days after gold future prices plunged more than $30 an ounce to erase all of its gains for 2015, following stronger than expected U.S. employment data.

The U.S. Dollar Index, which measures the strength of the greenback against a basket of six other major currencies, rose 0.9017% or 0.88 to 98.47 on Tuesday -- to reach a level not seen since 2003. A strengthening dollar affects dollar-denominated commodities like gold by making it more expensive for holders of other currencies to purchase the metal.

The dollar continues to skyrocket upon expectations of an interest-rate hike from the U.S. Federal Reserve by the time the Federal Open Market Committee meets in June. On Friday, the U.S. Bureau of Labor Statistics said the U.S. economy added 295,000 jobs in the month of March as the unemployment rate fell to 5.5%. The figures were responsible for causing one of the largest one-day declines on U.S. equity markets, exacerbating concerns that an interest-rate rise could come sooner than previously expected.

On Monday evening, Federal Reserve Bank of Dallas president Richard Fisher warned of a recessionary risk that could ensue if plans to raise interest rates are delayed even further. In remarks before Rice University's Baker Institute for Public Policy, Fisher said, "Every time the Fed has tightened policy after achieving full employment it has driven the economy into recession."

"It's because of this dynamic and my desire to prolong current expansion that I have argued that we should begin reducing policy accommodation earlier than many of my colleagues on the Federal Open Market Committee appear to prefer."

In China, meanwhile, markets reacted to government data which indicated that Chinese inflation for February rose to 1.4%, above expectations of 0.9% inflation. A month earlier, inflation in China reached 0.8%. China is the second largest purchaser of the precious metal in the world, behind India.

In Shanghai, the city's gold, commodities, equities and bonds markets are reportedly in search for ways to attract more foreign funds following comments from president Xi Jinping last week encouraging the city to open its doors to global investors. The comments are believed to be the strongest verbal support Jinping has offered for Shanghai to become an international center of financial trade.

Elsewhere, traders in Europe are awaiting discussions on Wednesday in Brussels between Greece and its euro zone creditors. Negotiations hit a snag between the sides on Monday when the group of the euro zone finance ministers emphatically rejected Greece's proposed reform measures that are seen as a prerequisite to extend its bailout package.

Silver futures for May delivery also fell 0.133 or 0.84% to trade at 15.643 a troy ounce.

Copper delivery for May dropped 0.049 or 1.83% to $2.622 a pound.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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