Gold futures headed lower Wednesday as global stocks rose and the U.S. dollar recovered from a two-year low on Tuesday, creating some headwinds for bullion values.
The U.S. Dollar Index, a gauge of the buck against a half-dozen currencies, was up 0.4% at 92.671, with that index elevated by a retreat in the euro (EURUSD) The retreat by the euro followed comments from European Central Bank’s chief economist Philip Lane, who said the euro’s strength would influence policy makers’ forecast for the region’s economic growth and have an impact on monetary policy decisions. The comments came after the euro, which represents the heaviest weighting in the U.S. dollar index (DXY) , reached a psychologically significant level, changing hands at $1.20.
A weaker U.S. currency can make gold more attractive to overseas buyers on a relative basis and vice versa.
“Bullion’s decline is proportional to the recovery of the greenback, confirming that the current movement is mostly related to what is happening on the currency markets,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades. “In other words, the main trend for gold remains positive and a clear surpass of $1,990 and then $2,005 would open space for further rallies,” he wrote.
December gold (GCZ20)(GC00) traded $14.60, or 0.7%, lower at $1,964.30 an ounce, following its gain of less than 0.1% on Tuesday, which still helped to mark its highest settlement since Aug. 18 for a most-active contract, according to FactSet data.