Gold Prices Slip; Silver Prices Also Fall

Gold prices edged lower on Wednesday as stronger U.S. dollar undermined the demand for the dollar-dominated commodities, including gold. Silver prices also slipped on Wednesday.

At last check, U.S. gold futures edged down 0.24% to $1,587.80 an ounce.

Gold which jumped to 1-½ week high on Tuesday, breaching $1,590 an ounce level after Germany’s central bank, the Bundesbank raised concerns over the  recovery of euro zone economy, found more support on Wednesday following a worse-than-expected economic data release from the euro zone.

Bullion momentarily climbed to its two week high on Wednesday to $1,599.10 an ounce after an economic data release showed that euro zone’s industrial output in January contracted more-than-expected. The yellow metal tends to gain in the backdrop of economic uncertainty.

However, strength in the U.S. dollar, which was boosted by better than expected U.S. February sales data, and weakness in euro (weighed by disappointing economic data) capped gains.

Typically, strength in the U.S. dollar weighs on the demand for dollar priced commodities as they become more expensive to buy for those traders who deal in currencies other than the greenback.

Besides, incessant outflow from gold-backed exchange traded funds is weighing on the sentiment.

“Gold gains when data shows that the euro zone economy is still suffering. But yesterday’s attempt to regain the $1,600 level is still capped by the fact that a number of institutional investors appear still happy to withdraw their money from the market,” said Commerzbank commodity analyst Daniel Briesemann , according to Reuters.

A data provided by Thomson Reuters showed that holdings of SPDR Gold Trust (ETF) (NYSE: GLD), world’s largest gold-backed exchange traded fund, dropped for the fourth successive session to 1,236.307 tons as of Monday March 12, a lowest level since October 2011.

With no major economic data lined up this week, bullion investors will now keenly wait for the Federal Reserve’s next policy rate meeting, scheduled to be held on March 19-20 to gain more clues on what does the central bank thinks about ongoing $85 billion worth monthly bond purchase program. Should it decides to halt the ongoing monetary easing measures sooner than expected then gold prices will be under tremendous pressure.

Silver futures were down 0.81% to $28.935, at last check.

In late trading on Wednesday, the iShares Silver Trust (ETF) (NYSE: SLV) was down 0.64% to $28.02, the ProShares Ultra Silver (ETF) (NYSE: AGQ) was down 1.30% to $39.50, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) was up 1.57% to $53.02.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.