Gold Ends Lower On Soft Data, Strong Dollar

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Gold futures snapped a four-day gain to end lower on Tuesday, as the dollar strengthened and on some soft macroeconomic data out of the U.S. leaving investors pondering over the U.S. Federal Reserve plans on scaling down its quantitative easing program. Prices were also impacted after India, the biggest consumer of gold in the world, hiked the import duty for the precious metal metal in a bid to stem its rising current account deficit. Retail sales in the U.S. rose for the fourth consecutive month in July, a report from the Commerce Department showed Tuesday, albeit slightly weaker than expected due to a notable drop in auto sales. Meanwhile, after reporting decreases in U.S. import prices in the four previous months, a Labor Department report indicated a modest increase in import prices in July.
India lifted the import duty on gold and silver on Tuesday in a bid to curb domestic demand for the precious metals and narrow its huge current account deficit. The tariffs on gold imports were raised for the third time this year, to 10 percent from 8 percent, the Ministry of Finance said in a statement. The duty on silver too was increased to 10 percent, from 6 percent.
Gold for December delivery, the most actively traded contract, dropped $13.70 or 1 percent to close at $1,320.50 an ounce Tuesday on the Comex division of the New York Mercantile Exchange. Gold for December delivery scaled an intraday high of $1,341.00 and a low of $1,317.80 an ounce.
Yesterday, gold ended sharply higher as investor sentiment improved on hopes that physical demand for the precious metal will help support bullion prices after data revealed higher gold consumption in China. The dollar index, which tracks the U.S. unit against six major currencies, traded at 81.79 on Tuesday, up from 81.48 late Monday in North American trade. The dollar scaled a high of 81.88 intraday and a low of 81.40. The euro traded lower against the dollar at $1.3251 on Tuesday, as compared to $1.3300 late Monday in North America. The euro scaled a high of $1.3316 intraday and a low of $1.3234.
In economic news, retail sales in the U.S. rose for the fourth consecutive month in July, edging up 0.2 percent in July following an upwardly revised 0.6 percent increase in June. Economists had expected sales to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month. The drop in sales growth was due mainly to a notable drop in auto sales.
Separately, the U.S. Commerce Department said business inventories in the U.S. were virtually unchanged in the month of June, a report showed Tuesday. Business inventories came in unchanged in June after edging down by 0.1 percent in May. Economists expected inventories to increase by about 0.2 percent.
Meanwhile, U.S. import prices showed a modest increase in July, rising 0.2 percent following a revised 0.4 percent decrease in June. However, the price growth fell well short of economist estimates for a 0.9 percent increase.

Source: RTT Staff Writer
Source: Bullion Bulletin

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