Gold falls below trading range, touches 4-month low as dollar firms

[NEW YORK] Gold fell 1 per cent on Thursday, hitting a four-month bottom below its recent trading range, as Wall Street stocks rose and the U.S. dollar strengthened on optimism about passage of a U.S. tax overhaul.

Spot gold dropped 1 per cent to US$1,251.11 an ounce by 2pm EST (1900 GMT), bouncing off a four-month low of US$1,250.51. US gold futures for February delivery settled down US$13, 1 per cent, at US$1,253.10 per ounce.

Gold broke out of its recent trading range this week after slipping below its US$1,267 200-day moving average. Since mid-October, prices had stayed between US$1,265 and US$1,300 an ounce as investors poured money into the stock market, which hit a series of record highs.

The stock market gains dicouraged gold buying, as did expectations that the Federal Reserve would raise US interest rates this month.

"From a technical point of view, many traders had stop-losses just below US$1,262, and today the market is going down for this reason," said ActivTrades chief analyst Carlo Alberto de Casa.

A stronger US dollar also sparked selling of gold, he said. The dollar touched a two-week high on Thursday on optimism the United States would push through a Republican tax package by a Dec 22 deadline.

Financial markets will watch US non-farm payrolls data Friday, a key barometer of the US economy. Next week the US Federal Reserve is expected to announce a rise in interest rates and offer guidance on the pace of further increases.

"The question is whether this weakness in gold is an image of the December 2015 and 2016 charts, where the metals began significant rallies after the rate increase announcement, or if we are in a different paradigm this time around," Kitco Metals Inc said in a note.

Rising US interest rates increase the opportunity cost of holding non-yielding gold while boosting the dollar, in which it is priced.

"In 2018, we're looking at a US$1,325 price target," said George Gero, managing director of RBC Wealth Management in New York.

"There's a lot to worry about with geopolitical and other threats, and a possible stock market correction." Among other precious metals, silver dropped 1.1 per cent to US$15.79 an ounce after slipping to its lowest since mid-July at US$15.72.

Platinum slid 1.2 per cent at US$890.74 an ounce, earlier touching its lowest since July 11 at US$889.50. The metal has fallen nearly 5 per cent this week and is on track for its biggest weekly loss in nine months.

Palladium was up 1.8 per cent at US$1,011 an ounce.

REUTERS