Gold fell for a seventh straight session
on Friday, its longest losing streak in four years, as the dollar rose
to the highest since 2008 after some Federal Reserve officials said the
central bank should end its stimulus for the U.S. economy.
Investors also rejected gold's safe-haven lure after a May reading for
U.S. consumer sentiment hit a near six-year high, showing Americans are
feeling better about their financial and economic prospects.
Major U.S. stock indexes were on track to close up for a fourth straight
week as the dollar rocketed to a 4-1/2-year high against the yen.
Spot gold was down 1.6 percent, hovering at a four-week low below $1,364 an ounce.
U.S. gold futures for June delivery settled down 1.6 percent at $1,364.70. For the week, it fell more than 5 percent.
Some traders expected the sell-off to not let up until gold lost
between $200 or $300 more per ounce, pushing it back to levels last seen
in the first quarter of 2010.
"With a few more hard losing sessions, we could be down to between
$1,050 and $1,100. It could happen over two weeks or it could happen in a
couple of days if the market plunges $100 a dip," said Frank McGhee,
head precious metals trader at Integrated Brokerage Services in Chicago.
"There's heavy rotation of money from gold into the stock
market as the U.S. economy keeps getting better and the need for Fed
stimulus gets weaker by the day," McGhee added.
A trio of hawkish regional Federal Reserve officials have called on
the central bank to stop buying mortgage-backed bonds, citing the recent
improvement in the U.S. housing market.
San Francisco Fed
chief John Williams, one of the three, said he expected U.S. stimulus
action to ease from this summer. Richard Fisher, head of the Dallas Fed,
meanwhile, said "the efficacy of continued (bond) purchases is
questionable."
Ultra low interest rates and hundreds of
billions of dollars of Fed stimulus money have fueled higher prices for
gold and other commodities over the past 3 years. Despite better U.S.
economic data since the start of this year, Fed Chairman Ben Bernanke
has been reluctant to take his foot off the stimulator pedal, on grounds
the recovery has been fragile.
Exchange-traded products in
gold -- investment vehicles that give investors exposure to bullion
through issuing securities backed by the physical metal -- have seen
huge outflows this year.
The largest, New York's SPDR Gold Trust, reported an outflow of another 5.7 tonnes on Thursday, bringing the drop in its holdings this week to more than 10 tonnes.
Physical demand for the metal, which spiked after prices posted their
biggest two-day drop in 30 years in April, showed signs of softening.
Buying in India, the main consumer of the precious metal, had fallen
significantly from Monday, which saw the celebration of Akshaya Tritiya,
one gold trader in Singapore said.
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