Gold Settles Lower as Dollar, US Equities Strengthen

Gold futures dropped for a third straight session to end at a one-week low Wednesday, as investors opted for the rising US equities amid some upbeat factory orders data, and with the dollar trending higher against some major currencies.

In some upbeat economic news from the US, manufactured durable goods orders rose more than expected in July, downplaying concerns over the health of the economy.

The encouraging data could also push the Fed Reserve toward a rate hike, which would help the dollar to strengthen.

Markets in the US strengthened but have since moved back after opening sharply higher. The strength on Wall Street stems from traders looking to pick up stocks at reduced levels following the downturn seen on Tuesday.

On Wednesday, China introduced new stimulus measures to provide further liquidity into the sagging economy.

China’s central bank injected 140 billion yuan or USD28.80 billion into the financial system through its short-term liquidity operations facility. The Peoples’ Bank of China had also lowered interest rates for the fifth time in nine months on Tuesday.

Gold for December delivery, the most actively traded contract, fell USD13.70 or 1.2%, to settle at USD1,124.60 an ounce, on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for December delivery scaled an intraday high of USD1,146.00 and a low of USD1,116.90 an ounce.

On Tuesday, gold prices for December delivery dropped USD15.30 or 1.3%, to settle at USD1,138.30 an ounce, with investors opting for the equity assets after anxiety over a possible stock market meltdown eased after China cut its benchmark interest rates to boost its faltering economy.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged at 681.10 tons on Wednesday from its previous close of 677.83 tons.

The dollar index, which tracks the US unit against six major currencies, traded at 94.99 on Wednesday, up from its previous close of 93.96 in late North American trade on Tuesday. The dollar scaled a high of 95.05 intraday and a low of 93.72.

The euro trended lower against the dollar at USD1.1366 on Wednesday, as compared to its previous close of USD1.1517 in North American trade late Tuesday. The euro scaled a high of USD1.1562 intraday and a low of USD1.1356.

In economic news, US manufactured durable goods climbed 2.0% in July after jumping an upwardly revised 4.1% in June, a Commerce Department report showed Wednesday. Economists expected orders to drop by 0.4%.

British retail sales growth improved unexpectedly in August, survey data from the Confederation of British Industry revealed Wednesday. The balance of the CBI’s distributive trades survey rose to +24 in August from +21 in the previous month. Economists had expected a balance of +18.

UK mortgage approvals rose for a seventh month in a row in July to their highest level in seventeen months, in line with economists’ expectations, figures from the British Bankers’ Association showed Wednesday.

The seasonally adjusted number of mortgage approvals for house purchased climbed to 46,033 from 44,802 in June, which was revised from 44,488. Economists had forecast 46,000 approvals for July.

The combined real gross domestic product of the member countries of the Organization for Economic Cooperation and Development grew at a slightly slower pace in the second quarter, data showed Wednesday. Real GDP expanded 0.4% sequentially, which was slightly slower than the 0.5% growth seen in the first quarter.

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