Gold at three-week low on stronger dollar, Fed stimulus outlook in focus

Gold fell for a fourth day on Tuesday as a stronger greenback weighed on the demand for dollar-denominated raw materials. Market sentiment remained dampened as investors assessed the possibility of an earlier-than-expected Fed stimulus tapering following a string of recent upbeat economic data. Silver and palladium fell, while platinum marked a minor daily advance.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December traded at $1 278.30 per troy ounce at 9:07 GMT, down 0.22% on the day. Prices shifted in a range between days high of $1 283.40 and session low of $1 275.90 an ounce, the weakest level since October 17. The precious metal fell by 0.5% on Monday, a third straight daily retreat, and extended its weekly decline to nearly 0.8% on Tuesday.

Gold extended losses as recent surprisingly upbeat U.S. data roused speculations for an earlier-than-projected deceleration of Feds quantitative easing program and continued to support the dollar. The Labor Department reported on Friday that U.S. job growth unexpectedly accelerated in October from a month earlier, signaling U.S. employers overall ignored the 16-day government shutdown last month and remained optimistic over the nation’s economic recovery. U.S. non-farm payrolls surged by 204 000 in October, exceeding the median estimate of 91 economists surveyed by Bloomberg for a 120 000 advance.

Meanwhile, American households’ income rose more than expected in September, according to data by the Commerce Department. Personal income jumped by 0.5%, beating forecasts for a 0.3% advance. The preceding month’s reading was revised up to 0.5% from initially estimated at 0.4%. Personal spending however grew at 0.2%, below August’s 0.3% advance.

Also supporting the case for Fed tapering, a preliminary reading showed on Thursday the U.S. economy expanded at a much faster pace in the third quarter than previously expected and exceeded the previous three months’ growth. Data by the Commerce Department showed U.S. GDP (Gross Domestic Product) growth surged 2.8% in the three months trough September, the most in a year, defying analysts’ projections for a drop to 2% from the preceding quarter’s 2.5% expansion.

The U.S. dollar index, which measures the greenbacks performance against a basket of six major counterparts, traded at 81.38 at 9:08 GMT, up 0.28% on the day. Prices shifted in a days range between 81.45 and 81.14. The December contract fell by 0.2% on Monday but rose back to positive weekly territory following Tuesdays rebound, up 0.1%. The U.S. currency gauge surged to a 1-1/2-month high of 81.57 on Friday after the release of the U.S. employment data. Strengthening of the greenback makes dollar-priced commodities more expensive for foreign currency holders and limits their appeal as an alternative investment.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, remained unchanged for a fourth day on Monday at 868.42 tons, data on the web site showed. This was near the lowest level since the beginning of 2009.

Market players are awaiting the statements of Fed Bank of Minneapolis President Narayana Kocherlakota and Atlanta Fed President Dennis Lockhart later today to further assess the central banks tapering intentions. Their Philadelphia peer, Charles Plosser, and Fed Vice Chairwoman Janet Yellen are due to speak on Thursday.

Elsewhere on the precious metals market, silver futures for settlement in December fell by 0.63% to $21.148 per troy ounce by 8:58 GMT. Prices plunged to a day low of $21.050, the weakest level since October 15, while days high stood at $21.535. Platinum for delivery in January traded at $1 433.70 per troy ounce, up 0.09% on the day, and held in range between $1 439.45 and $1 431.65 an ounce. Palladium December futures lost 0.64% and traded at $749.70 an ounce at 9:00 GMT. The contract shifted in a days range between $754.40 and $748.70 an ounce respectively.