Dollar Rally Spurs Drop in Gold

Benchmark bullion futures are skidding $19.80 at $889.20 an ounce.
By Simon Constable ,

Gold prices fell again Thursday after better-than-expected economic news boosted the greenback against the European currency.

Benchmark bullion futures were skidding $19.80 at $889.20 an ounce in recent action on the Comex division of the New York Mercantile Exchange.

New claims for unemployment insurance fell much more than expected, while orders for durable goods, such as washing machines, fell less quickly than they did previously. The good news more than offset any concerns from yet another report of declining new home sales and helped boost the value of the dollar against the major currencies. Over time, the price of gold tends to move in the opposite direction to the value of the U.S dollar.

The

streetTracks Gold Shares

(GLD) - Get Report

was slipping 1.3%. Holdings of bullion by the fund dropped 11 tons Wednesday, bringing the total inventory down to 612 tons, continuing a slide that started in March.

"I think in the short term there is a little bit more downside price risk," says James Moore, gold analyst at

TheBullionDesk.com

in London. "Possibly we could see a retest of lows around $872."

Demand related to a forthcoming festival in India should, however, provide some price support in the form of physical demand, he explains.

In the mining patch, shares of

Newmont Mining

(NEM) - Get Report

were falling 1.6% in recent activity despite first-quarter earnings that were much better than expected.

Goldcorp

(GG)

,

Barrick Gold

(ABX)

and

Kinross Gold

(KGC) - Get Report

each sank 4.1% or more.

The U.S. currency was strengthening against the euro to $1.5707 from $1.5894 in the prior session. One dollar was buying 103.92 Japanese yen, up from 103.50 yen previously. The British pound was buying $1.9704, down from $1.98.

The currency exchange-traded funds were following the action in the foreign-exchange market. The

CurrencyShares Euro Trust

(FXE) - Get Report

and the

CurrencyShares Japanese Yen Trust

(FXY) - Get Report

were falling 1.2% and 0.5%, respectively. The

CurrencyShares British Pound Sterling

(FXB) - Get Report

was off 0.5%.

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