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It was a good week for the US dollar, which gained strength on the back of the Fed`s announcement that it will be ending its stimulus program. Meanwhile, Japan announced the start of its own quantitative easing program. As a result, commodities took a beating this week.
South of the border, the Dow Jones climbed 83.87 points to 17,058.18. Meanwhile, the NASDAQ slipped 15.94 points, to 4,533.29, and the S&P 500 index dropped 2.04 points, to 1,980.26.
On the precious metals front, gold dropped on Friday to its lowest level since July 2010, hitting $1,161.25, but recovered slightly to come to $1,164.64 per ounce later in the day, according to Reuters. Claiming responsibility for the dramatic slide in price was a well-performing dollar and positive equities as the Bank of Japan initiated more quantitative easing and the US economy continued to perform well.
“Spot gold is at its lowest for four years … and it could fall further towards the $1,120 level if the dollar strengthened even more significantly,” ActivTrades analyst Carlo Alberto De Casa told Reuters. “More stop losses could be triggered if we consistently broke below $1,170, but the downside seems limited by the fact that we are close to cost of production above $1,000.”
US gold futures fell $34 to $1,164.70 per ounce.
Likewise, spot silver fell 4 percent to reach its lowest level since February 2010, trading at $15.76 per ounce. It rose slightly later in trading, hitting $15.92 per ounce, according to Reuters.
Copper on the London Metal Exchange also fell due to the strong dollar, according to Reuters, as US data indicated good news for the country’s economy. Three-month copper fell 0.3 percent to trade at $6,719 per tonne.
“We saw some significant moves in Asian risk assets and that has lent support to risk appetite and to base metals,” Gayle Berry, metals strategist at Jefferies Bache, told Reuters. “To me it feels temporary, but that said, positioning is short for some of the metals and the complex could have a bit of a bounce towards the end of the year.”
Copper for December delivery on New York’s COMEX went in the opposite direction, rising $0.018 to trade at $3.0805 per pound, according to FastMarkets.
Finally, Brent crude oil fell more than a dollar to trade at $84.90 per barrel on Friday as the US dollar rose, as per CNBC. A stronger dollar means commodities are more expensive for those buyers who use other currencies, which lowers demand.
“The market is asking how low the price must go before output is trimmed,” Bjarne Schieldrop, chief commodities analyst at SEB in Oslo, told CNBC.
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