Gold Ends Sharply Lower As Dollar Strengthens

(RTTNews) - Gold futures ended sharply lower on Tuesday, after having surged over three percent yesterday, as the dollar trended higher against a select band of currencies.

A strong dollar tends to make dollar-denominated commodities such as gold less attractive for holders of other currencies, as it makes them more expensive.

Gold for February delivery, the most actively traded contract, dropped $18.70 or 1.5 percent to settle at $1,199.40 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday.

Gold for February delivery scaled an intraday high of $1,212.60 and a low of $1,191.40 an ounce.

Investors also weighed some mixed economic data, with U.S. construction spending rising more than anticipated in October, even as eurozone producer prices dropped at its fastest in 18 months during October.

Investors also await some crucial U.S. economic data, including the monthly non-farm payrolls report due later this week, amid speculations the U.S. Federal Reserve will start hiking rates some time soon.

On Monday, gold futures surged to end at a five-week high of $1,218.10 an ounce, up $42.60 or 3.6 percent, having plunged to $1,141.90 an ounce intraday -- the lowest level in nearly a month. The uptick followed a weak dollar amid some bargain hunting, while a weak reading on Chinese manufacturing activity in November weighed on the yellow metal early on.

The precious metal also dropped early Monday after Swiss voters rejected a proposal to hike the national bank's gold reserve to at least 20 percent from its current level of 8 percent.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 717.63 tons on Tuesday, from its previous close of 720.91 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.63 on Tuesday, up from its previous close of 87.98 late Monday in North American trade. The dollar scaled a high of 88.64 intraday and a low of 87.95.

The euro trended lower against the dollar at $1.2381 on Tuesday, as compared to its previous close of $1.2470 late Monday in North American trade. The euro scaled a high of $1.2476 intraday and a low of $1.2384.

On the economic front, construction spending in the U.S. surged 1.1 percent to an annual rate of $971.0 billion in October from the revised September estimate of $960.3 billion. Economists expected spending to increase by about 0.5 percent.

Eurozone producer prices dropped at its fastest pace in 18 months during October, pulled down by a slump in energy prices.

Eurozone producer prices fell 0.4 percent month-over-month in October, reversing a 0.2 percent rise in September, preliminary figures from Eurostat showed Tuesday. Economists had forecast a 0.3 percent decline for the month. The news adds to the deflationary woes in the euro area while strengthening the case for more action from the European Central Bank.

Elsewhere in Europe, robust performance of the British construction sector continued in November, even as the pace of growth eased to its lowest in 13 months, suggesting the trend would likely continue in the months ahead supporting economic recovery.

The seasonally adjusted construction purchasing managers' index dropped to 59.4 in November from 61.4 in the previous month, a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics showed Tuesday. Economists anticipated the index to ease to 61.0.