GOLD prices declined today as easing oil prices dimmed the metal’s allure as a refuge investment and inflation hedge, and a stronger US dollar also clipped demand.
The most actively traded gold contract, for April delivery, fell $US17.10, or 1.2 per cent, to settle at $US1412.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Nearby March gold also lost $US17.10, to $US1412.20.
“Gold sold off because crude sold off,” said Ira Epstein, director of the Ira Epstein division of the Linn Group.
The metal — which isn’t closely linked to manufacturing cycles — had benefited as a haven in recent days amid fears about high oil prices dragging on the economic recovery as unrest continued in the Middle East and Africa.
But investors felt less of a need for the precious metal today as crude futures slumped while traders turned their attention from Libya to rising oil supplies in the US and signs of global economic weakness.
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“There’s a moment when the market settles back and regroups,” Mr Epstein said. “It’s a day of profit-taking.”
Additionally, falling crude prices lessened investor desire for gold as a hedge against rising consumer and producer prices.
“If you’re buying gold for the inflation theme, you just took a bullet out of your gun,” said Frank Lesh, broker and analyst at FuturePath Trading.
A strengthening US dollar also damped demand for the precious metal. The ICE Futures US Dollar Index was up 0.7 per cent after gold closed. A higher buck tends to pressure US dollar-denominated gold by making it more expensive for foreign buyers, crimping demand.
“The market is cautious,” said George Gero, vice-president with RBC Capital Markets Global Futures. “The stronger dollar is pulling back metals.”
The US dollar remained higher even after data showed new US jobless claims last week rose more than expected and the US trade deficit in January widened sharply.
Investors were still buying the greenback as they focused on the fragile state of some euro-zone area finances, with a ratings agency overnight downgrading Spain, sending the euro sharply lower.
Other precious metals traded in New York also fell, with Comex May silver dropping 2.7 per cent, Nymex April platinum losing 2 per cent and Nymex June Palladium also shedding 2 per cent.