Gold Ends Sharply Lower On Syria, Weak Dollar

(RTTNews) - Gold futures took a sharp dive to end at a near two-week low, below the $1,400 mark on Wednesday, after surging over one percent yesterday, with investors closely monitoring the developments surrounding the push for military action against Syria by the U.S. and its allies. The precious metal slumped despite production being hit as a result of the ongoing South African gold mines strike with workers demanding more pay, even as indications of possible negotiations appeared bright.

Gold prices found little support after some positive economic news, with China's service sector business activity increasing at the fastest rate in five months in August as new orders expanded strongly, a survey by HSBC and Markit Economics revealed Wednesday. Meanwhile, the eurozone private sector expanded at the fastest pace in just over two years, although the growth was slightly weaker than initially estimated in August. Activity in the German private sector increased for the fourth successive month in August, final data from a survey by Markit Economics and BME showed.

Nonetheless, U.S. trade deficit widened in July after reporting the smallest deficit in over three years in the previous month, a Commerce Department report showed Wednesday.

Gold for December delivery, the most actively traded contract, plummeted $22.00 or 1.6 percent to close at $1,390.00 an ounce Wednesday on the Comex division of the New York Mercantile Exchange.

Gold for December delivery scaled an intraday high of $1,412.90 and a low of $1,373.60 an ounce.

Yesterday, gold gained over 1 percent to settle above the $1,400-mark, regaining its safe haven status on continued tension over military action against Syria with President Barack Obama pushing hard for a quick Congressional approval. The precious metal was also supported by strikes at South African gold mines and on some upbeat manufacturing activity data out of China.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, moved down to 919.23 tons from 921.03 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 82.17 on Wednesday, down from 82.38 late Tuesday in North American trade. The dollar scaled a high of 82.43 intraday and a low of 82.08.

The euro traded higher against the dollar at $1.3207 on Wednesday, as compared to its previous close of $1.3171 late Tuesday in North America. The euro scaled a high of $1.3220 intraday and a low of $1.3158.

In economic news from the U.S., the Commerce Department said the trade deficit for July widened to $39.1 billion compared to a revised $34.5 billion deficit in June. Economists expected the deficit to widen to $39.0 billion from the $34.2 billion originally reported for the previous month.

China's service sector business activity increased at the fastest rate in five months in August as new orders expanded strongly, a survey by HSBC and Markit Economics revealed Wednesday. The services business activity index rose to a five-month high of 52.8 in August from 51.3 in July. This followed a four-month period of relatively stagnant growth.

From the eurozone, activity in the German private sector increased for the fourth successive month in August final data from a survey conducted jointly by Markit Economics and BME showed. The seasonally adjusted composite output index, a measure of activity in the manufacturing sector and the service sector, rose to a seven-month high 53.5 in August from 52.1 in July. The preliminary estimates were for a score of 53.4.

Meanwhile, the eurozone private sector expanded at the fastest pace in just over two years, but the rate of growth was slightly weaker than initially estimated in August, final survey data from Markit Economics showed. The composite output index rose to 51.5 in August from 50.5 in July. The final reading was slightly below the flash estimate of 51.7.

A report from Eurostat revealed that retail sales in eurozone increased less than expected in July. Sales rose 0.1 percent in July from a month earlier compared with forecast for a 0.2 percent growth. This followed a 0.7 percent decline in June.

Elsewhere, service sector activity in the U.K. grew at the strongest pace in more than six-and-half years in August as incoming orders increased significantly, strengthening the recovery that started at the beginning of the year. The Markit/CIPS purchasing managers' index for the services sector climbed to 60.5 from 60.2 in July, contrary to economists' forecast for a decline to 59.7. The outcome of the survey, together with the stellar performance by the manufacturing sector and the construction sector, signals that the economy is on course to register a stronger growth in the September quarter.