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Gold prices decline on dismal retail sales report

Gold prices decline on dismal retail sales report

Gold prices fell for a third straight session Wednesday after a dismal retail sales report further raised investors' concerns about a sharp drop in demand for a variety of commodities and raw materials.
While investors already knew that the holiday shopping season had been particularly weak, the Commerce Department said retail sales dropped 2.7 percent last month, more than double the decline analysts expected. The pullback, which marked a record sixth straight month of declines, only reinforced investors' worries that consumers are still struggling.
Consumers have been paring their spending amid rising unemployment and dwindling household wealth, which doesn't bode well for commodities. As people spend less, demand for basic materials and other products falters and prices fall further.
"Things are getting worse," said Catherine Virga, base metals analyst with CPM Group in New York, adding that there won't be much upside in metals and other commodities as long as there is evidence of a prolonged recession.
Meanwhile, the dollar fell against the British pound Wednesday, but gained strength against the euro and the Japanese yen, which also hurt gold prices. The dollar has largely dictated the direction of gold and other commodities in recent months, as they are often used as a hedge against inflation and a weak greenback. Foreign currencies have been weakening as central banks overseas cut their interest rates in an effort to boost their economies. This has benefited the dollar.
"The strength in the dollar has definitely been a negative in gold," said Tom Pawlicki, commodities analyst with MF Global Research in Chicago.
Gold for February delivery fell $11.90 to settle at $808.80 an ounce on the New York Mercantile Exchange, bringing its three-day decline to 5.4 percent.
Other metals prices also fell. March silver fell 20.5 cents to $10.4750 an ounce, while March copper futures slid 5.95 cents to $1.4875 a pound.
The retail sales report, compounded by worries over the health of the financial sector, also sent stocks tumbling Wednesday. The Dow Jones industrials slid for a sixth straight day, falling nearly 250 points or 2.94 percent. The broader market indexes fell more than 3 percent.
Bond prices rose as stocks fell, a sign that investors were again seeking the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.20 percent from 2.30 percent late Tuesday.
Energy prices fell on the Nymex, as new government reports showed crude inventories continuing to build, which suggests that demand for oil and gasoline will be weak for some time.
Light, sweet crude for February delivery fell 50 cents to settle at $37.28 a barrel.
In other Nymex trading, gasoline futures rose less than a penny to settle at $1.677 a gallon, while heating oil fell 4.4 cents to $1.4702 a gallon.
Grain prices mostly rose on the Chicago Board of Trade.
March wheat futures rose 3.5 cents to $5.7425 a bushel, while corn for March delivery added 4 cents to $3.6650 a bushel.
March soybeans were unchanged at $9.7150 a bushel.


Updated : 2021-04-18 10:52 GMT+08:00