Gold falls toward $1,100 as risk appetite drops

By Frank Tang and Veronica Brown

NEW YORK/LONDON (BestGrowthStock) – Gold fell toward $1,100 an ounce on Tuesday as a resurgent dollar driven by weak U.S. consumer confidence sapped investor risk appetite across the board.

Signs of global monetary tightening to guard against inflation, currency volatility due to worries about the debt of Greece, and liquidation related to COMEX March option expiration on Tuesday also weighed down on prices.

Bullion, traditionally seen as a safe haven in economic uncertainties, has been moving in tandem with asset classes that are perceived riskier in nature, taking the lead from equities and other commodities such as oil.

“There are a lot of similarities between gold and all other markets, which are moving virtually the same way according to risk appetite,” said Rick Bensignor, chief market strategist at broker-dealer Execution LLC.

Spot gold was at $1,102.05 an ounce by 3:49 p.m. EST (2049 GMT), compared with $1,113.60 quoted late in New York on Monday, some 2.5 percent off Monday’s one-month highs.

U.S. April gold futures settled down $9.90 at $1,103.20.

Bensignor said that April should bounce after falling toward key technical support in the $1,098 to $1,094 an ounce area, which connected its record high and peaks in January and February peaks.

The dollar rose against the euro and a basket of currencies as falling risk appetite boosted the greenback after U.S. consumer confidence fell in February to the lowest in 10 months.

Dealers and analysts said attempts at rallies were failing as the market focused on U.S. monetary policy after the Federal Reserve tightened its emergency lending rate last week.

“The common denominator here is the dollar strengthening, particularly against the euro,” said Robin Bhar, an analyst at Credit Agricole CIB. “There is probably a bit of buying of the dollar or short-covering — the market is just a bit jittery ahead of what Bernanke says.”

San Francisco Federal Reserve Bank President Janet Yellen said the U.S. economy still needed extraordinary low interest rates as inflation was “undesirably low.”

Bernanke will give testimony to Congress on Wednesday and Thursday.

Falling crude oil prices and broad-based decline in commodities also weighed down on gold’s inflation hedge appeal. Oil dropped about 1.5 percent to $79 a barrel.

James Steel, chief commodities analyst at HSBC, said that commodities such as oil seemed to have reached a near-term peak, lessening support to gold.

CFTC HEARING DATE SET

In regulatory news, the U.S. Commodity Futures Trading Commission said on Tuesday it will hold a previously announced public meeting on March 25 to examine whether position limits are needed for gold, silver and copper futures markets.

While bullion fell with other key commodities last week after the Fed’s emergency lending move, some analysts said the outlook remained constructive for gold, which as a non-interest rate bearing asset benefits from a low-rate environment.

Dealers also said gold was benefiting in non-dollar terms from sovereign risks surrounding some euro zone countries — notably Greece. Gold priced in euros stayed near a record high hit last week.

In other precious metals, silver fell in line with gold to $15.83 per ounce from $16.20 quoted late in New York on Monday. Platinum was at to $1,510 from $1,521.50, while palladium stood at $428.50 from $440.

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(Additional reporting by Lewa Pardomuan in Singapore; Editing by Lisa Shumaker)

Gold falls toward $1,100 as risk appetite drops