05/10/2013 Gold News
MADRID (MarketWatch) — Gold futures fell sharply on Friday, setting up for a weekly loss, as the U.S. dollar continued to ramp up against the yen. Meanwhile, BNP Paribas cut its gold price view, but said the metal will be trading back above $1,600 an ounce in six months.
Losses for the June gold contractGCM3 -2.51% were ramping up, down $40.90, or 2.8%, to $1,427.92 an ounce. The precious metal sliced a weekly gain to a loss of 2.4%, on the heels of two straight winning weeks.
Gold on Thursday fell $5.10, or 0.4%, extending losses after the U.S. Labor Department said weekly initial claims for unemployment benefits fell by 4,000 to 323,000, the lowest level in more than five years and beating forecasts calling for a slight rise. A week prior the Labor Department reported the economy added 165,000 jobs in April, and that the unemployment rate slipped to 7.5% from 7.6%, blowing out forecasts.
The Federal Reserve has indicated it’s likely to taper monetary stimulus depending on improvement in the labor market. The Fed’s quantitative-easing program has been a benefit for gold, as QE tends to pressure the dollar and can lead to inflation. Gold is often seen as an inflation hedge.
Following the jobless-claims data, the U.S. dollar DXY +0.42% climbed above ¥100 for the first time since April 2009, and the Australian dollar AUDUSD -0.7829% fell near parity. The dollar extended gains against the yen on Friday, trading above ¥101.
A stronger dollar tends to hurt prices for dollar-denominated commodities such as gold as it makes them more expensive for holders of other currencies.
BNP analysts Harry Tchilinguirian and Stephen Briggs cut their 2013 gold forecast by 5% to $1,580 an ounce from an earlier outlook in a note. They also knocked their 2014 forecast by 5% to $1,520 an ounce, also down 5%.
However, in six months, the analysts predicted gold will be trading back above $1,600 an ounce. Accommodative Federal Reserve policy is one reason, along with continued low inflation and low nominal interest rates.
Meanwhile, silver for July delivery SIN3 -2.28% on Friday fell 57 cents, or 2.4%, to $23.33 an ounce, and copper for July delivery HGN3 +0.20% was flat at $3.34 a pound.
June palladium PAM3 -2.41% fell $12.75, or 1.8%, to $702 an ounce. July platinumPLN3 -1.89% tumbled $24, or 1.6%, to $1,492.50 an ounce.
Palladium prices were on track for a weekly rise of 1.3%, but platinum was looking at a 0.6% drop and copper was higher by 1%. Silver prices were poised for a loss of 2.8% for the last week.