NEW YORK, MarketWatch (01/10) — Gold futures extended losses on Friday,
as the U.S. dollar rallied against the euro on speculation that low
euro-zone inflation may prompt the European Central Bank to lower
interest rates.Gold for December delivery dropped $11.30, or
0.9%, to $1,312.40 an ounce in electronic trading on the New York
Mercantile Exchange. The contract fell nearly 2% on Thursday after the
Federal Reserve -- in a statement the prior day -- maintained the pace
of bond-buying, but kept tapering plans on the table. The U.S.
dollar on Friday rallied against other major currencies, especially the
euro, making dollar-denominated commodities such as gold more expensive
for holders of other currencies. The dollar index rose 0.4% to
80.545 on Friday morning, while the euro dropped 0.5% to $1.3516. Data
Thursday showed inflation in the euro zone fell to the lowest level in
almost four years in October, fueling speculation that the European
Central Bank will cut interest rates. The euro “has come under
heavy liquidation as currency traders readjust their positions believing
that the ECB will now become progressively more dovish as it tries to
battle the deflationary forces in the region, while the Fed will turn to
tightening as it considers a taper of [quantitative easing] early next
year,” said Boris Schlossberg, managing director of FX strategy at BK
Asset Management. In other metals trading on Friday, December silver was flat at $21.86 an ounce.
