Gold extended losses into the Asian session on Monday, hurt by a stronger U.S. dollar, fears over China`s demand after a sudden tightening in liquidity and uncertainty about the Federal Reserve`s monetary stimulus program.
As of (09:30 GMT+3), gold for immediate delivery fell 1.25% or 16.20 points on Monday to trade at $ 1,279.75 an ounce after opening at $1,296.57, having earlier hit a high of $1,301.25 and a low of $1,278.75.
Last week, gold plunged to its lowest since September 2010, along with other commodities and global stock markets, after Fed chairman Ben Bernanke again suggested that U.S. economic growth was strong enough to begin tapering back on its $85 billion in monthly asset purchases later this year.
The drop in the metal’s prices failed to revive physical demand while investors continued to slash holdings in gold exchange-traded funds, despite the metal`s safe-haven asset. Holdings in the SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, fell 0.54 percent to 989.94 tons on Friday - the lowest in over four years.
Other metals:
- Silver fell 2.44% to trade around $ 19.61
- Platinum lost 1.34% to $ 1,354.50
- Palladium declined 1.56% down to $ 664.05
The dollar extended its rally on Monday, as investors flocked back to the greenback after signs the Federal Reserve would start winding up its massive stimulus drive later this year. Easing measures tend to weigh on a currency as they flood markets with cash, making it less in demand.
The USDIX is currently trading around 82.85 after opening at 82.70, having so far hit a high of 82.91 and a low of 82.69.
Elsewhere, The People’s Bank of China noted its readiness to adjust monetary policies and boost further easing. The recent cash squeeze is threatening the nation’s economy and is deepening the economic slowdown. Cash liquidity in the world’s second largest economy inclined to its highest levels since 2003, amid recent illegal capital inflows which curbed the nation’s growth.
The rate spikes are a reaction to Beijing`s decision earlier this week to withhold new infusions of cash into the markets. One of the central bank`s aims is to slow the growth of China`s ballooning debt, and stop easy access to credit.