Gold Ends Slightly Lower As Dollar Strengthens

(RTTNews) - Gold futures ended slightly lower on Tuesday, as the dollar strengthened against a basket of major currencies and equity markets in the U.S. and Europe recovered to trade higher, even as the volatile Chinese stocks cut down on the losses seen yesterday.

The Shanghai stock exchange closed Tuesday down 1.7 percent, after having slumped a near 8.5 percent yesterday. The Shanghai Composite Index fluctuated sharply during the session, having traded down 5 percent and a near 1 percent high intraday.

Markets in Europe also ended firmly in positive territory on Tuesday, while the U.S. markets are also trending higher.

Meanwhile, physical demand for gold plunged 14 percent in the second quarter this year, news reports citing a survey report from GFMS said. The physical demand for gold in the second quarter is indicated to have declined 14.2 percent to 858 tonnes from a year ago, and down 15.5 percent from the first quarter. This is lowest level of global demand for gold since 2009.

With the Federal Reserve expected to raise interest rates this year, gold's appeal as an inflation hedge is very limited with prices having slipped about 7 percent so far this year.

The 2-day Federal Reserve meeting kicked off today, with the monetary policy announcement expected tomorrow. The Fed is widely expected to leave interest rates unchanged on the conclusion of its 2-day meet on Wednesday, with investors firmly focused on the Fed statement for any hints about the timing of the first rate hike.

Gold for August delivery, the most actively traded contract, dipped $0.20, to settle at $1,096.20 an ounce, on the Comex division of the New York Mercantile Exchange on Tuesday.

Gold for August delivery scaled an intraday high of $1,098.20 and a low of $1,090.70 an ounce.

On Monday, gold prices jumped $10.90 or 1.0 percent, to settle at $1,096.40 an ounce, as the dollar trended lower and on safe haven demand as world-wide equity markets continued to decline, led by a sharp sell-off on the Shanghai market.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged at 680.15 tons on Tuesday, from its previous close of 684.63 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 96.67 on Tuesday, up from its previous close of 96.54 in late North American trade on Monday. The dollar scaled a high of 96.97 intraday and a low of 96.47.

The euro trended lower against the dollar at $1.1060 on Tuesday, as compared to its previous close of $1.1090 in North American trade late Monday. The euro scaled a high of $1.1100 intraday and a low of $1.1023.

On the economic front, a Standard & Poor's report on Tuesday showed the annual rate of price growth during May to be well below economist estimates, with home prices in major U.S. metropolitan areas unexpectedly declining.

The S&P/Case-Shiller 20-City Composite Home Price Index rose 4.9 percent year-over-year in May, reflecting a modest slowdown from the upwardly revised 5.0 percent growth seen in April. Economists expected the annual rate of price growth to accelerate to 5.6 percent from the 4.9 percent increase originally reported for the previous month.

Confidence among U.S. consumers has seen a substantial deterioration in the month of July, according to a report released by the Conference Board on Tuesday. The Conference Board said its consumer confidence index tumbled to 90.9 in July from a downwardly revised 99.8 in June. Economists expected the index to show a much more modest decrease to a reading of 99.6 from the 101.4 originally reported for the previous month.

A measure of future economic activity in Eurozone rose for the seventh successive month in June, signaling a modest recovery in economic activity through the balance of the year, the Conference Board said Monday. The Conference Board's Leading Economic Index, or LEI, for the euro area increased 0.4 percent to 107.1, after a 0.3 percent rise in May. In April, the index rose by 0.5 percent.

French unemployment rose marginally to a fresh record in June, data released by the labor ministry revealed late Monday. The number of unemployed increased 1,300 in June from the prior month to 3.55 million. From a year ago, it rose by 4.7 percent.

U.K. economic growth accelerated in the second quarter driven by an improvement in services output, which has again fueled debate over the timing of the interest rate hike. Gross domestic product grew 0.7 percent sequentially, in line with forecast, following a 0.4 percent rise in the first quarter, preliminary estimate from the Office for National Statistics showed Tuesday.

House price inflation in England and Wales reached its 3-month high in June, after easing in the previous nine months, data from the Land Registry showed Tuesday. The house price index rose 5.4 percent year-over-year in June, faster than previous month's 4.6 percent climb. The latest rate of inflation was the highest since March, when prices grew the same 5.4 percent.