Gold futures knocked lower by rising dollar

By Polya Lesova, MarketWatch

Last Update: 10:14 AM ET May 1, 2008

NEW YORK (MarketWatch) — Gold futures fell nearly 1% Thursday, as a rise in the
U.S. dollar dampened investment demand for the precious metal.

Gold for June delivery dropped $8.40 to $856.60 an ounce on the New York
Mercantile Exchange.

“The return of dollar strength this morning has led to a swift reversal in
direction with gold dropping back to $864, and given the pace of decline,
suggests gold will remain at risk to further corrections in the coming sessions,”
said James Moore, an analyst at TheBullionDesk.com, in a research note.

Gold had finished Wednesday’s regular trading session sharply lower, ending down
$11.70 at $865.10. However, in electronic trading, gold rallied, boosted by the
Federal Reserve’s decision to cut the fed funds rate by 25 basis points to 2.0%.

“Despite the lack of a clear pause signal in yesterday’s Fed announcement, the
markets are treating May/June as the pivot point beyond which they can no longer
reliably depend on ever cheaper dollars to fuel speculative binges in
commodities,” said Jon Nadler, senior analyst at Kitco Bullion Dealers.

On the currency markets, the dollar rallied after data on jobless claims and
personal spending.

The dollar index, which tracks the performance of the greenback against a basket
of other major currencies, rose 0.8% to 73.17. See Currencies.
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In economic news, the Labor Department reported that first-time filings for state
unemployment benefits surged 35,000 to 380,000 in the week ending April 26. Wall
Street economists had expected a result of 360,000. See Economic Report.
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Separately, the Commerce Department estimated that consumer prices rose 0.3% last
month, matching the 0.3% rise in incomes. Real disposable incomes were unchanged
in March after accounting for taxes and inflation. Read more.
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Also on the Nymex, July silver fell 30 cents to $16.29 an ounce and July platinum
fell $37.80 to $1,897.40 an ounce. June palladium dropped $16.60 to $406.15 an
ounce.

July copper fell 7 cents to $3.84 a pound.

Oil futures also fell, pressured by dollar strength. See Futures Movers.
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