Forex Pros — Last week saw gold prices post their biggest weekly decline in two months, as a broadly stronger U.S. dollar and easing concerns over oil-led inflation reduced the appeal of the precious metal.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery settled at USD1,503.15 a troy ounce by close of trade on Friday, dropping 2.4% over the week.
Prices fell below the psychologically important level of USD1,500 an ounce on Friday for the first time in five weeks, hitting USD1,499.15 a troy ounce, the lowest price since May 20.
The U.S. dollar strengthened against the euro amid concerns that Greece’s parliament will not approve a package of austerity measures next week, adding to investors nervousness over the region’s debt crisis.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.65% on the week to settle at 76.08, after earlier rising to 76.69, the highest since June 16.
The greenback was also boosted after Federal Reserve Chairman Ben Bernanke confirmed on Wednesday that the bank was winding up its USD600 billion bond-buying program at the end of June and said further easing was unlikely.
Global financial service provider Credit Suisse said on Friday that, “The dour economic news recently, combined with dwindling hopes for any further quantitative easing in the near term, are weighing heavily on the metals.”
Gold futures tumbled nearly 2.1% on Thursday, tracking heavy losses in crude prices, after the International Energy Agency announced that it would release additional supplies from strategic reserves in response to loss of supplies from Libya.
Easing oil prices tend to weigh on gold as it diminishes its appeal as a hedge against oil-led inflation.
Comments from Chinese Premier Wen Jiabo late Thursday that Beijing’s efforts to cool accelerating consumer prices have worked and that the pace of inflation would slow in the future also helped ease inflation expectations.
In the week ahead, the focus looks likely to remain on Greece, with the Greek parliament due to hold its critical vote on austerity measures on Wednesday and Thursday.
Elsewhere, silver for July delivery traded at a five-week low of USD34.32 a troy ounce by close of trade on Friday, plunging 4.7% over the week, while copper for July delivery traded at USD4.104 a pound, edging 0.24% higher on the week.