Gold futures extend losses on Friday, as the U.S. dollar rallies against the euro on speculation that low euro-zone inflation may prompt the European Central Bank to lower interest rates.
NEW YORK (MarketWatch) — Gold futures extended losses on Friday, as the U.S. dollar rallied against the euro on speculation that low euro-zone inflation may prompt the European Central Bank to lower interest rates.
Gold for December delivery dropped $11.30, or 0.9%, to $1,312.40 an ounce in electronic trading on the New York Mercantile Exchange. The contract fell nearly 2% on Thursday after the Federal Reserve — in a statement the prior day — maintained the pace of bond-buying, but kept tapering plans on the table.
The U.S. dollar on Friday rallied against other major currencies, especially the euro, making dollar-denominated commodities such as gold more expensive for holders of other currencies.
The dollar index rose 0.4% to 80.545 on Friday morning, while the euro dropped 0.5% to $1.3516. Data Thursday showed inflation in the euro zone fell to the lowest level in almost four years in October, fueling speculation that the European Central Bank will cut interest rates.
The euro “has come under heavy liquidation as currency traders readjust their positions believing that the ECB will now become progressively more dovish as it tries to battle the deflationary forces in the region, while the Fed will turn to tightening as it considers a taper of [quantitative easing] early next year,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
