Stronger dollar forces gold lower for third day

Key Points
  • Spot gold expected to fall to $1,301/oz — Technicals
  • SPDR Gold holdings fall for second straight session
  • Palladium hits 12-week low
Getty Images

Gold prices leveled out on Thursday despite a strengthening U.S. currency making dollar-denominated bullion more expensive for holders of other currencies.

Spot gold was down just 0.01 percent at $1,317.98 an ounce at 3:31 p.m. EST. U.S. gold futures for April delivery were 0.41 percent higher at $1,320 an ounce.

A global stock market selloff has driven investors to the relative safety of the dollar, lifting it from 3-year lows and pushing gold from an 18-month high reached in late January. "The same thing that pushed gold up in January is pushing it down in February - the dollar," Commerzbank analyst Carsten Fritsch said.

Momentum indicators suggested gold would fall to $1,300, said analysts at ScotiaMocatta, with technical support at $1,303, the 50-day moving average. Holdings of gold in exchange-traded funds tracked by Reuters have declined more than 1 percent this month and this week saw the biggest one-day fall since July, helping pull prices lower.

Dow has biggest reversal since August 2015

Also pressuring gold were comments by Federal Reserve officials that stock market turbulence was unlikely to derail interest rate rises this year. The Fed will stick to its plan for "steady, gradual" rate increases, said San Francisco Fed President John Williams.

Higher rates are negative for gold because they push bond yields higher, reducing the attraction of non-yielding gold, and tend to boost the dollar. However, analysts polled by Reuters said they did not expect the dollar to rebound this year, despite expectations of at least three rate rises. They forecast the dollar index to end this year at 88.7, compared with around 90.5 on Thursday.

In other precious metals, silver was up 0.11 percent at $16.39 an ounce after touching $16.22, the lowest since Dec. 22.

Platinum traded at one-month lows, down 0.59 percent lower at $974 an ounce. Palladium was 1.9 percent lower at $965.50 an ounce after reaching its lowest since Nov. 15 at $976.97.

Having risen 56 percent last year to an all-time high in January, palladium, used in catalytic converters to control vehicle emissions, has fallen below technical support at its 55-day moving average and broken an 8-month uptrend, said analysts at Commerzbank.

"The market has topped as we suspected. We look for a slide to the $1,000 level and the $976 mid-November low and allow for losses to the $940.40 200-day moving average," they said. "Palladium now appears to have run out of steam."