Gold falls amid stronger dollar

Gold for August delivery fell from a two-week high and traded at $1 396.85 a troy ounce at 14:13 GMT, down 1,07% on the day. The greenback rose around 0,4$ against a basket of major currencies, which pressured gold prices down. The dollar and dollar-priced commodities, such as gold, tend to trade inversely. A stronger dollar reduces golds appeal as an alternative investment and also makes it more expensive for foreign currency holders.

The greenback rebounded on Friday as disappointing EU economic data was published. Euro zones unemployment rate reached the record level of 12.2% in April, surpassing the 12.1% level in March. This is the highest jobless rate since statistics started tracking it in 1995.

Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago said for Bloomberg: “The dollar is strong, so that’s pushing down gold again. We had a small technical rally earlier, but at the end of the day, these rallies seem to be more about hope than reality.”

Gold prices were strongly supported by increased physical demand from China, India and many central banks. This partially countered the massive gold unloading done by private and institutional investors in the past two months, like George Soros. Russia and Kazakhstan have been diversifying assets by buying gold after prices contracted with a record pace. The two countries have kept buying gold for a seventh straight month. Turkey is also on the list of countries, which have expanded their gold reserves. Turkey’s holdings increased by 18,2 tons to 427,1 tons in April, a tenth straight month rise. Belarus’s holdings increased for a seventh month and Azerbaijan’s and Greece’s reserved gained for a fourth month in a row. Gold demand in India, world’s largest buyer, will hit a quarterly record according to the World Gold Council and will reach 300 to 400 metric tons, equal to half of the total shipments last year.

However, some analysts stated an opinion that demand will falter, if prices dont drop fall back. Chinas gold demand may decrease in the second half of the year. Zhang Bingnan, secretary-general of the China Gold Association said: “The kind of frenzied buying in late April and early May won’t be repeated”. He also commented some of the jewelry demand for festivals and weddings later this year may have been brought forward during April and May due to the lower prices.