Gold futures on Thursday marked their largest daily drop and lowest settlement month to date, with the tumble pushing bullion below a psychologically and technically significant level at $1,300.
Gold and silver both declined, "pressured by a rebound in the U.S. dollar index and by chart-based sellers entering the futures markets," said Jim Wyckoff, senior analyst at Kitco.com.
June gold GCM9, +0.02% on Comex fell $20.60, or 1.6%, to settle at $1,293.30 an ounce. That was the lowest finish and largest single-session loss for a most-active contract since March 28, according to FactSet data. The selloff marked a sharp reversal in momentum in the metal after it finished at $1,313.90 on Wednesday - the highest finish since March 26 and representing its longest win streak, for sessions in a row, since a five-day rise ended Jan. 31.
"Producer inflation coming in higher than anticipated along with further analysis of FOMC minutes has set up battle to hold $1,300," said Jeff Wright, executive vice president of GoldMining Inc. "The key level was broken earlier in week on profit taking and further pressured by data this week as well as Brexit delay taking some safe haven interest out of equation."
"I think we still move higher in next week or two after sentiment settles down and weak hands rotate out," he said.
Gold turned slightly lower for the week, but had seen support earlier in the week as concerns over an economic slowdown fueled demand for assets perceived as havens. Among recent downgrades, the International Monetary Fund this week cut its outlook for global economic growth - the third cut in six months.
May silver SIK9, +0.42% fell 37.7 cents, or 2.5%, to $14.867 an ounce.
On Thursday, a popular dollar index, the ICE U.S. Dollar Index DXY, -0.32% rose 0.2% to 97.183, providing some support for dollar-denominated gold prices. The greenback, however, traded 0.2% lower week to date.
Gold's vulnerability had emerged in electronic trading Wednesday after the settlement, when prices moved lower following the release of the minutes of the Federal Reserve's March monetary policy meeting, which packed no surprises. The minutes showed that the Fed's decision in March to cease raising interest rates this year was driven by unease over the U.S. and global economies and surprisingly subdued inflation.
"The minutes confirmed that if the economic data continue to support the economy, a rate hike could be on the table at the back end of this year. Luckily for the dollar bears, this wasn't the majority view, at least, not for the time being," said Naeem Aslam, analyst at ThinkMarkets. Gold and the dollar tend to move inversely.
"I do believe that for the time being the Fed is going to continue to sit on its hands and just monitor the situation carefully. The evidence of this comes from the fact that the gold price is still trading above the $1,300 mark. For bulls, this is a critical level, it sends a strong signal of recovery and hope. As long as the price stays above this critical mark, we have hope that the price may cross the $1,350 level," Aslam said.
Gold added to losses after a reading of weekly jobless claims for the seven days ending in April 6 showed that claims sank below 200,000 for the first time since 1969, falling by 8,000 to 196,000. Separately, March's producer-price index rose 0.6% in March amid higher energy costs. Economists polled by MarketWatch had predicted a 0.3% increase. Core PPI, excluding volatile food and energy prices, was flat in the month, underlining persistently subdued inflation readings.
In related news Thursday, the Silver Institute's World Silver Survey, compiled by the GFMS team at Refinitiv, revealed that total silver demand rose by 4% to a three-year high of 1.03 billion ounces in 2018. Investment demand was strong, with silver bar demand jumping by 53%. Global silver mine production, however, edged lower for a third straight year, down 2% to 855.7 million ounces.
Elsewhere on Comex, May copper HGK9, +1.89% fell 1.3% at $2.887 a pound. July platinum PLN9, +0.01% lost 1.5% to $895.30 an ounce, while June palladiumPAM9, +0.93% dropped 2.2% to $1,332.60 an ounce.
Among the exchange-traded funds, SPDR Gold Shares GLD, -0.10% fell 1.3%, while the VanEck Vectors Gold Miners ETF GDX, -0.18% declined by 1.7%.
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