Gold retreats as dollar rallies, inflation concern eases

14:41, May 14, 2011      

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Gold futures on the COMEX Division of the New York Mercantile Exchange fell below 1,500 dollars per ounce mark again on Friday, pressured by the strengthening U.S. dollar, along with rising expectations of ebbing inflation pressures in the United States.

The most active gold contract for June delivery lost 13.2 dollars, or 0.9 percent, to 1,493.6 dollars per ounce.

The dollar regained strength on Friday as Greece debt fears resurfaced, pulling the euro lower and boosting the dollar. Meanwhile, the fact that the Federal Reserve moved closer to ending the QE2 also fueled the dollar rally.

The dollar index, which measures against a basket of six major currencies, jumped 0.9 percent. The stronger dollar heavily weighed on the precious metal, as it makes the bullion more expensive for holders of other currencies.

U.S. consumer prices rose at a seasonally adjusted 0.4 percent in April, following a 0.5 percent rise in March, buoyed up by higher gasoline and grocery prices.

Core CPI, which is considered a more reliable indicator as it excludes volatile food and energy prices, rose by 0.2 percent in April, which is in line with economists' pervious expectation.

The slow increase in inflation also took the wind out of gold's sails, as many investors purchase gold as a hedge against rising inflationary pressure, and some investors decided to trim its holding of gold as inflation concerns ebbs.

Silver for July delivery added 21.6 cents, or 0.6 percent, to 35.013 dollars per ounce. Platinum for July delivery dropped 1.7 dollars, or 0.1 percent, to 1,769.3 dollars per ounce.

Source: Xinhua
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