Gold weakens on dollar rally after Federal Reserve decision

The most-active US gold futures contract fell as much as 2 per cent to $1,772.5, before recovering to $1,777.30.

Technical indicators bode ill for gold prices. Spot gold prices could fall towards $1,730 during the day, said Reuters market analyst Wang Tao.

The dollar index rose to a seven-month high as investors piled into the greenback, lured by the appeal of short-term rates on US bonds after the Fed announcement.

A pricier dollar makes commodities denominated in the greenback more expensive to buy for holders of other currencies.

“Investors are buying the dollar and selling gold,” said Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong Kong.

“But the physical supply is a bit tight, as Asian buyers stock up on physical gold.”

Investors are shifting their attention to the Group of 20 talks, due to take place in Washington on Thursday and Friday, where Europe will be under heavy pressure to stem its deepening debt crisis.

Other precious metals also weakened amid a commodity-wide slide. – Reuters

1 2

Tags: Gold analysis, Gold future prices, Gold futures, Gold investment, Gold news, Gold price, Gold price forecast, gold prices, Silver price, silver prices