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Gold futures headed lower Wednesday as global stocks rose and the U.S. dollar recovered from a two-year low on Tuesday, creating some headwinds for bullion values.
The U.S. Dollar Index, a gauge of the buck against a half-dozen currencies, was up 0.4% at 92.671, with that index elevated by a retreat in the euro EURUSD, -0.44% The retreat by the euro followed comments from European Central Bank’s chief economist Philip Lane, who said the euro’s strength would influence policy makers’ forecast for the region’s economic growth and have an impact on monetary policy decisions. The comments came after the euro, which represents the heaviest weighting in the U.S. dollar index DXY, +0.40% , reached a psychologically significant level, changing hands at $1.20.
A weaker U.S. currency can make gold more attractive to overseas buyers on a relative basis and vice versa.
“Bullion’s decline is proportional to the recovery of the greenback, confirming that the current movement is mostly related to what is happening on the currency markets,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades. “In other words, the main trend for gold remains positive and a clear surpass of $1,990 and then $2,005 would open space for further rallies,” he wrote.
Read:The dollar’s fall is likely to continue—here’s why you can thank the Fed
December gold GCZ20, -0.70% GC00, -0.70% traded $14.60, or 0.7%, lower at $1,964.30 an ounce, following its gain of less than 0.1% on Tuesday, which still helped to mark its highest settlement since Aug. 18 for a most-active contract, according to FactSet data.
December silver contract SIZ20, -2.98% SI00, -2.98%, meanwhile, shed 82 cents, or 2.9%, at $27.830 an ounce, after gold’s sister metal gained 0.2% in the previous session.
Beyond the dollar, the decline in precious metals prices also came as global stocks enjoyed more gains on some hope for better daily testing for COVID-19 and perceived progress in vaccines.
The S&P 500 ES00, +0.62% SPX, +0.75% and the Nasdaq Composite NQ00, +0.97% NQU20, +0.97% indexes were poised to open at records ahead of reports on the U.S. economy, including jobs and business conditions, which could influence trading in financial markets.
