Capital Gold Group Report: Dollar Falls Again Pushing Gold Higher
NEW YORK
(MarketWatch) -- Gold futures reversed earlier losses on Tuesday, as
the dollar fell against major counterparts on bleak U.S. economic data,
while traders reconsidered the importance of an expected sale of gold
reserves by the International Monetary Fund.
Gold for April delivery was up $4 to $944.80 an ounce on the New York Mercantile Exchange.
Gold futures ended lower Monday after a senior Treasury official said
the U.S. supports the proposed sale of part of the gold reserves held
by the IMF.
"But there is an
understanding that the IMF issue is minor at best," said Brien Lundin,
president at Jefferson Financial. "The sale still needs congressional
approval, which remains doubtful, and the amount would be minor
anyway."
"In the past, IMF gold
sales have typically marked a buying opportunity for people who had
missed a rally," Lundin said.
A lower dollar also
boosted the appeal of bonds. Gold, as many commodities, is denominated
in dollars and a lower U.S. currency makes it more affordable in other
currencies.
The dollar fell against
major currencies, after an unexpectedly sharp rise in the producer
price index and a plunge in consumer confidence heightened fears that
the U.S. economy may end up in the grip of stagflation.
For gold, long-term fundamentals remain favorable, Lundin said.
"The long-term downtrend of the dollar losing favor, expectations that
the [Federal Reserve] will cut interest rates by at least another half
a point, global economies are a bit stronger than the U.S. economy and
that's boosting demand pressures on commodities and [inflation]," he
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