Gold prices fell below the $1,200 mark on Wednesday as the demand for U.S. dollar went up amidst the Turkish lira contagion crisis.
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Gold Futures for December delivery dropped by 0.37% to $1,196.2 per troy ounce at 1:01AM ET (05:01 GMT) on the Comex division of the New York Mercantile Exchange.
The U.S. dollar index, which tracks the greenback against a basket of other currencies, rose by 0.18% to 96.72, just below a 13-month peak of 96.794 on Tuesday.
“Some stop-loss selling pushed the market lower below $1,200…we can see some fresh buying interest from here as well as physical interest,” said Peter Fung, head of dealing at Wing Fung Previous Metals in Hong Kong.
“However, the [gold] market is still under pressure as the U.S. dollar is still very strong. Also, interest rates are poised to go higher and market sentiments are bearish on gold,” he added.
Meanwhile, the Turkish lira crisis remained in focus after the U.S. imposed sanctions against Turkey and raised tariffs on silver and aluminum of its NATO ally last week.
On Tuesday, Erdogan urged the country to boycott iPhone and other American electronics as he condemned the “explicit economic attack” against his country. “We are going to apply a boycott on America’s electronic products. If they have the iPhone, there is Samsung (KS:005930) on the other side. And we have our own telephone brands. We are going to produce enough for ourselves. We have to serve better quality goods than we are importing from them,” Erdogan said.
Investors traditionally use gold as a means to preserve the value of their assets during times of political and economic uncertainty.
Amit Kumar Gupta, portfolio management services head at Adroit Financial Services, expected little light in the tunnel for the future of the gold market.
“People are punting on better growth prospects in the U.S., hurting gold’s prospects…Technically, gold is looking bad and may test $1,165…If the Turkey contagion spreads further, we may see some buying [in gold]. But, as of now, the U.S. dollar continues to be a safe haven buying option,” he said.