Gold May Come Under Selling Pressure Ahead Of US CPI

Gold and silver futures fell sharply Thursday as the dollar flexed its muscles following big rises in U.S. retail sales and the Producer Price Index, trimming expectations for further U.S. rates cuts, traders and analysts said.

Weaker crude oil also played a role in the metals' pullbacks. Much of the selling was described as speculative profit-taking, particularly with year-end approaching.

February gold tumbled $14.80 to $804 an ounce on the Comex division of the New York Mercantile Exchange. As pit trade was closing, the February contract at the Chicago Board of Trade also was down $14.80 to $804.

March silver lost 58.8 cents to $14.237.

The US dollar was boosted after the the government reported that the U.S. November Producer Price Index rose 3.2%, the biggest one-month jump since 1973. It was well above the 1.7% forecast. Meanwhile, core PPI excluding food and energy was up 0.4%, double the expectation.

Retail sales climbed 1.2% last month when 0.6% was forecast, and sales excluding autos surged 1.8% versus a 0.7% expectation. Still another report showed a 7,000 decline in first-time weekly jobless claims to 333,000, when 338,000 were forecast.

Outlook:

MCX Gold futures are likely to open higher today, as there has been a recovery in the COMEX Gold during early Asian hours. But the commodity may continue to face selling pressure at the higher levels given the recent pullback in the US dollar, which seems to be getting more and more support on expectations that the markets may not take the US Fed for granted in terms of furtherinterest rates softening given the strength in the latest data releases. The MCX Gold futures may face sustained selling around Rs 10300 levels and intraday traders are better off selling the counter on rallies given the prospects of a further acceleration in the US dollar ahead of the US consumer price inflation data.