Comex gold futures edge lower Monday on the compromise reached on the federal budget at the weekend and a stronger dollar.
The most actively traded contract for June delivery was recently down 0.4%, or $ 5.50 of $ 1,468.60 per troy ounce on the Comex division of the New York Mercantile Exchange. The contract had a fresh all-time high overnight, up to $ 1,478 per troy ounce.
The April delivery was down 0.3%, or $ 5, $ 1,468.40 per troy ounce on.
The U.S. federal government avoided a shutdown late Friday after the Republican and Democratic leaders reached an agreement on cuts for the remainder of the current fiscal year. While a larger battle looms over the 2012 fiscal budget, the current deal removes the threat of a shutdown and the government will finance the rest if the current fiscal year to maintain.
“The budget issues in the U.S. temporarily solved and a bit out of the table takes a risk,” said Sterling Smith, an analyst with Country Hedging.
Gold prices rallied to the concerns of the possible shut down, as the yellow metal is seen as a hedge against political risks.
A stronger dollar weighed on gold prices Monday. The greenback recovered lost ground to the euro, the European single currency recently trading at $ 1.4423 from $ 1.4480 late Friday.
Dollar-denominated gold futures seem more expensive for buyers with foreign currency as the dollar strengthened.
Traders are also wary of the strong support gold prices attract interest from speculative investments. Managed funds, including hedge funds, added to their bets on higher prices for the third consecutive week, while their net long position by 8.8% to 216,868 contracts in the week ended April 5.
Meanwhile meager investment flows in the physical-gold exchange traded funds, which are considered a proxy for a long term investment, an apparent weakness in the current gold rally.
“Correction potential building,” said analysts at Commerzbank.
Gold traders are also watching for comments by the Federal Open Market Committee members William Dudley and Janet Yellen. Recent speeches by FOMC members have revealed a fracture in the direction of monetary policy that has alarmed bullion dealers. Gold prices are particularly sensitive to interest rate rises as gold is not an interest-bearing assets.
source:onlinewsj
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