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Gold sinks below $1,400

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Capital Market
Last Updated : May 16 2013 | 11:00 AM IST

Bullion metal prices ended lower on Wednesday, 15 May 2013. Comex gold prices ended the U.S. day session sharply lower and sank below $1,400 an ounce on Wednesday, logging their lowest close in almost four weeks as the U.S. dollar strengthened, equities climbed and outflows from gold exchange-traded funds continued.

Gold for June delivery ended lower by $28.3 (2%) at $1,396.2 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday.

July silver ended lower by $0.72 cents (3.1%) at $22.66 an ounce on Wednesday.

A news report Wednesday said a survey of investment fund managers showed the vast majority of those money managers are shunning the raw commodity sector as an investment asset.

Reports of disappointing demand for physical gold at the peak demand season in India are also bearish for the yellow metal. Spring weddings and a holiday this week in India have seen gold demand in that nation increase somewhat, but not as much as many market had expected.

In other overnight news, the Euro currency fell on news of a weaker-than-expected European Union gross domestic product figure. For the sixth quarter in a row, EU GDP came in at negative growth. First-quarter EU GDP came in at minus 0.2%, compared with the fourth-quarter of last year. The GDP data from the EU suggests the European Central Bank will keep its pedal to the metal on its aggressive easing of its monetary policy.

The U.S. dollar index hit a 9.5-month high Wednesday. In the currency market, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by 0.4% on Wednesday.

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Among economic data expected at Wall Street on Wednesday, April producer prices declined 0.7%, which was cooler than the downtick of 0.5% forecast by the consensus. Meanwhile, core producer prices rose 0.1%, in-line with the Briefing.com consensus. Industrial production fell 0.5% in April after increasing a downwardly revised 0.3% (from 0.4%) in March. The consensus expected industrial production to decline 0.2%.

Manufacturing production declined 0.4% in April after declining 0.3% in March. The drop was in-line with the weakness reported in nearly all of the regional manufacturing surveys. Durable and nondurable goods manufacturing fell 0.6% and 0.1%, respectively. The rate of capacity utilization fell to 77.8% from a downwardly revised 78.3% (from 78.5%) in March. That is the lowest level of capacity utilization since January. Manufacturing capacity utilization dropped to 75.9%, which is the first time since November 2012 that the utilization rate slipped below 76%.

Separately, the Empire Manufacturing Survey for May registered a reading of -1.43, which was down from the prior month's reading of 3.1. Economists had expected that the survey would rise to 3.5.

At the MCX, gold prices for June delivery closed lower by Rs 397 (1.5%) at Rs 26,310 per ten grams. Prices rose to a high of Rs 26,704 per 10 grams and fell to a low of Rs 26,188 per 10 grams during the day's trading.

At the MCX, silver prices for July delivery closed lower by Rs 1,202 (2.7%) at Rs 43,314/Kg. Prices opened at Rs 44,400/kg and fell to a low of Rs 42,950/Kg during the day's trading.

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First Published: May 16 2013 | 9:58 AM IST

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