Gold prices fell by as much as 1% on Thursday, falling below the key level of $1,300, as strong economic data in the US strengthened the dollar, leading to a decline in safe haven metal prices.
Spot gold fell 0.7% to $1,297 an ounce after falling earlier by 1% to $1,294 an ounce.
Gold futures in the US fell 0.9% to $1301.40.
“Gold is under a lot of pressure right now as it lost a critical support at $1,300,” according to senior US commodities analysts.
The PPI rose better than expected and showed little inflation. This may make the US Federal Reserve take some action on raising interest rates. The dollar is also slightly stronger, which leads to selling.
The dollar index, which measures the currency versus a basket of six major currency rivals, rose after reports that March producer prices recorded the biggest rise in five months and weekly jobless claims fell to their lowest level since 1969.
A powerful USD makes gold more expensive for investors who hold other currencies.
Meanwhile, EU leaders granted the United Kingdom a six month delay for leaving the Union, and analysts said the move made gold seem unattractive for investors.
According to US commodities analysts, “A delayed Brexit is not good for gold as it takes some risks off the markets,”
Leading market analysts say that gold breaking below $1,300 will be seen as a negative bias in the charts used by technical traders.
Economists consider that while gold is still limited in the $1.275 – $1325 zone, it has become a trading instrument for many traders who seek to sell in the upper range and buy in the lower one.
Analysts said pessimistic views from major central banks on Wednesday failed to help gold as it was already priced in the markets, adding that investors were looking for more incentives to buy gold.
Low interest rates reduce the opportunity cost of holding non-yielding bullion. Meanwhile, The US Federal Reserve reiterated its view on the risks of an economic slowdown, while the ECB kept its monetary policy intact.
Spot platinum fell 0.2% to $899 an ounce. Palladium fell 1.2% to $1,371 an ounce, while silver fell 0.9% to $15.08.