Gold continues to decline amid rising economic optimism

TradingPub Admin | March 27, 2013

Responsive image

The price of gold fell for a fourth consecutive day on March 27, 2013, as improving sentiment surrounding the U.S. economy helped dampen demand for the metal as a safe haven asset.

Falling gold prices
June gold futures were valued at $1,596.80 per ounce by 8:08 a.m. on the Comex division of the New York Mercantile Exchange, after declining by as much as 0.3 percent earlier in the day, according to Bloomberg. At this point in the trading session, the transaction volume for the contract was 30 percent higher than the 100-day average. Reuters reports that the April Comex gold contract was trading $4.10 per ounce lower at $1591.60.

Rising sentiment
The sentiment of investors has been driven higher in recent months, as market participants have responded to news of an improving housing market and an increase in orders for durable goods in January, according to the news source. At the same time, concerns that inflationary pressures will flare up have been minimal, which has also served to cause global investors to flee the safe haven metal.

Confidence related to the strength of the U.S. economy was also impacted by recent statements made by Dallas Federal Reserve Bank President Richard Fisher, who stated his preference for gradually altering the existing bond-buying measures in response to the continual improvement in the economy, Bloomberg reports.

"The U.S. appears the picture of stability and relative strength," Xiao Fu, an analyst at Deutsche Bank AG in London, wrote in a recent report, according to the news source. "This has, in our view, been a key contributor to the moribund performance of gold."

Dominic Schnider, an analyst at UBS Wealth Management in Singapore, mimicked this bearish sentiment surrounding the metal, stating that investors are reluctant to hold the metal, let alone buy it, Reuters reports.

Gold challenges
While the price of the precious metal is on track to record a gain in March, it seems to be reversing its previous trend of appreciation that brought it 12 years of annual gains, as it is now on par to suffer two consecutive quarters of losses, according to Bloomberg.

The price of the precious metal plunged 5.5 percent during the final quarter of 2012, and is currently on track to lose 4.7 percent in the current quarter, the media outlet reports. If the current trend is continued, the commodity will suffer back-to-back quarterly losses for the first time since 2001.

One market that is experiencing tepid gold activity is Asia, according to Reuters. A Singapore-based dealer articulated stagnation in the region's trading of the precious metal, telling the news source that "prices are not going anywhere and there is no buying interest."

Market participants have said that the deals being done in this gold market are dwindling in number and the price movements have been less volatile, the media outlet reports.

If you want access to free, quality futures trading education, you can find it at TradingPub, which gives you the opportunity to interact with some of the top traders and investors in the industry.