Strength in the dollar pushes gold lower

THE gold market spent the week reacting to strength in the US dollar. The story of gold's price movement this week was also primarily follow-on weakness from last week's disappointment from the Federal Open Market Committee statement, where the Fed, though continuing to signal that it will maintain dovish monetary policies, did not announce any new initiatives and stimulus measures.

Without the presence of market moving events, gold prices broke down from the tight triangular consolidation pattern when the Dollar Index rallied to a 1-1/4 month high. Sentiment for gold also turned sour as the euro fell back against the dollar on a downbeat economic assessment from the Bundesbank, as European banks became embroiled in a money laundering scandal.

Gold futures fell to two-month lows as bulls liquidated long gold positions while the dollar continue to exhibit strength. US 10-year Treasury yields were also higher on comments from the Fed stating it would let inflation accelerate before it raises interest rates.