Daily Gold Update

Source: Reuters

New York— U.S. gold futures settled at a three-week low on Monday and silver slid to its cheapest in six weeks, knocked down by a rally in the dollar before a key U.S. Federal Reserve meeting this week, analysts said.

Gold for April delivery at the COMEX division of the New York Mercantile Exchange was down $8.30 at $431.40 an ounce, its weakest close since March 3, after trading between $440.30 and $429.20.

Precious metals got hammered as the dollar surged against rivals like the euro and Swiss franc on speculation the U.S. central bank may signal a quicker pace of interest rate hikes at its meeting on Tuesday.

A stronger U.S. currency tends to depress gold as it makes the dollar-denominated commodity costlier for non-U.S. buyers.

"It's a change in psychology in the market. You're seeing short-term spec liquidation and some aggressive selling" in gold, said Leonard Kaplan, president of Prospector Asset Management.

The euro stumbled more than 1 percent to $1.3164 by midafternoon, from $1.3312 near gold's close on Friday.

The Fed is widely expected to lift rates by a quarter percent to 2.75 percent on Tuesday. In addition, some expect the Fed could hint at a more aggressive stance by removing its reference to raising rates at a "measured" pace.

Higher interest hikes tend to prop up the dollar and thus reduce investment in gold, as foreign investors end up putting more money into dollar assets.

"Even though everyone knows the Fed is going to raise rates, today it moves to the forefront of everyone's thoughts," Kaplan said. "High rates will support the dollar and hurt the metals — it's very simple."

He felt that if April gold broke below chart support at $429.60 futures could sink to $415-$410 before steadying.

Another analyst said gold looked weak technically, citing the latest weekly Commitments of Traders data from the Commodity Futures Trading Commission.

The net speculative long position in COMEX gold futures jumped to 111,122 contracts as of March 15 from 70,477 lots a week earlier, the CFTC data showed.

IFR Markets analyst Tim Evans said the strong inflow into gold in the latest week's data, coupled with a small price increase and trade selling, was weighing on the market.

"What we don't like here is that they (large speculators) bought 40,645 contracts and the net increase in price over the same week was only 30 cents. There is some very determined selling here on the other, commercial side of the market," Evans said.

Evans put support in April gold at $429.80 and then $411.50 with resistance at $448 and $449 and then $460.50.

Spot gold was quoted at $431.00/431.50 an ounce from Friday's New York close at $439.00/9.70. The Monday afternoon fix in London was $432.70.

COMEX May silver shed 28.5 cents, or 3.9 percent, to end at $7.112 an ounce, the lowest close since Feb. 10, after moving between $7.405 and $7.065.

Chartists pegged support at $7.10 and $7.00 an ounce and resistance at $7.55 and $7.68.

Spot silver fetched $7.08/10 vs. $7.36/39 Friday night. It fixed lower at $7.25.

In NYMEX trading, April platinum dropped $9.80 to $870.20 an ounce. Spot platinum last was at $868/871.

June palladium lost $2.75 to $200.05 an ounce. Spot palladium reached $198/201.