Reply #40: Gold Falls, Heading for Second Monthly Drop After Dollar Gains [View All]

[Ghost Dog]

April 30 (Bloomberg) -- Gold fell, heading for a second straight monthly decline, as a strengthening dollar eroded demand for the precious metal as a hedge against inflation. Silver rose.

The U.S. Dollar Index has risen 1.7 percent in April, the first monthly gain this year, on speculation the Federal Reserve today will signal a slowdown in the pace of interest-rate reductions in the U.S. The rally in the index, which measures the U.S. currency against six major counterparts, has led to a 6.6 percent drop in gold this month.

``If the Fed signals a pause, the dollar will rally and we could see gold sell off pretty hard,'' said Matthew Zeman, a trader at LaSalle Futures Group in Chicago.

Gold futures for June delivery fell $1.20, or 0.1 percent, to $875.60 an ounce at 9:23 a.m. on the Comex division of the New York Mercantile Exchange, after earlier dropping to $864.10, the lowest prices for a most-active contract since Jan. 22. The metal fell 5.5 percent in March.

Trading in interest-rate futures shows a 22 percent chance the Fed will leave its benchmark rate unchanged in a policy announcement today. A month ago, trading showed that there was no chance of a pause.

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Gold pared its losses as a rally in energy prices eroded the metal's appeal as a hedge against inflation. Crude oil gained as much as 0.9 percent after a Commerce Department report showed the U.S. economy grew faster than expected in the first quarter. Gross domestic product rose at a 0.6 percent annual pace in the period. <--- ???

``Gold found some support after crude oil rallied off the GDP number,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``It's all about the crude move now. There's no independent thought in gold.''

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