Stronger greenback drives gold down ahead of big US debt auctions

NEW YORK/LONDON — Gold prices were pressured by a stronger US dollar and rising interest rates on Tuesday, dropping for a third session, but were underpinned by political worries and uncertainty about this week’s huge US bond auctions.

The greenback continued its rebound from three-year lows as investors shrugged off concerns about the US budget deficit and focused on large US government debt auctions scheduled this week.

“Gold is under pressure form the dollar index rallying significantly and interest rates continuing to rise,” said Phillip Streible, senior commodities strategist at RJO Futures. “I wouldn’t be surprised to see gold hold the 50-day moving average at $1,316.”

Spot gold shed 1.3% at $1,328.71 an ounce by 1:35 p.m. EST (1835 GMT), dropping to $1,328.26, its lowest since Feb. 14.

US gold futures for April delivery settled down $25, or 1.8%, at $1,331.20 per ounce.

The US Treasury Department Tuesday sold record amounts of three-month and six-month bills at the highest interest rates for these maturities at auctions in more than nine years, Treasury data showed.

The US Treasury will sell more than $250 billion worth of new debt this week, which analysts said would be a key gauge of international investors’ appetite for US assets.

The dollar has sold off in recent months on worries that the Trump administration’s recently passed tax cuts and plans for large government spending would widen the deficit.

Spot gold is expected to fall to the next support level at $1,326, according to Reuters technical analyst Wang Tao.

Geopolitical uncertainty, ranging from disunity at the recent Munich security conference to threatened US trade sanctions, may increase safe-haven demand for gold, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Gold investors are also anticipating the release on Wednesday of the US Federal Reserve’s January policy meeting minutes and the Thursday release of the European Central Bank’s latest policy meeting minutes.

Meanwhile, silver slipped 1.2% to $ 16.46 an ounce, hitting $ 16.44, its lowest since Feb. 14.

Palladium added 0.10% at $ 1,033.99 an ounce, after rising to the highest since Feb. 2 at $ 1,050 in the previous session. A major low was achieved earlier this month when palladium hit $ 957.75, Stéphanie Aymes, head of technical analysis at Societe Generale, said in a note.

“A break past $ 1,055 will prompt accrued positive signals towards $ 1,071/ 78… and more importantly towards the channel upper band at $ 1,145/ 55.”

Platinum dropped 0.20% to $ 1,000.20 an ounce after rising to a three-week high of $ 1,013.60 on Monday.