METALS : Gold Extends Losses

By Benjamin Parkin and Georgi Kantchev

Gold prices drifted downward Wednesday, extending losses after falling to the lowest point in 2018 this week.

The combination of a stronger U.S. dollar, higher Treasury yields and concern about rising interest rates prompted a selloff in the bullion market Tuesday, with prices seeing the largest single-day drop since 2016.

Some of those pressures eased Wednesday, with the dollar flattening, but gold prices continued to inch lower. Observers said chart patterns suggested to traders that the market hadn't bottomed yet.

"It doesn't look very good," said Edward Meir at INTL FCStone Inc. "The market is really just buckling because of the strength in the dollar, the strength in the interest-rate picture."

Gold futures for June delivery fell 0.2% to $1,287.50 a troy ounce, carving a new low for the year. Some analysts suggested traders were searching for a price range closer to the $1,280 mark.

Lower prices could spark some physical gold demand from investors and others for coins and jewelry, Mr. Meir said, which could help to limit losses going forward.

The WSJ Dollar Index, which measures the dollar against a basket of currencies, was slightly higher Wednesday morning at 86.97. The yield on 10-year U.S. Treasury notes drifted either side of Tuesday's high.

Market observers also pointed to an uptick in geopolitical tension as a potential tailwind for gold. North Korea this week suspended a meeting with South Korea and suggested that it could do the same for coming talks with the U.S., objecting to military exercises between the two countries and pressure from Washington to push rapid disarmament.

Commerzbank AG said that could stoke demand for gold as a haven asset, which investors typically buy at times of heightened instability.

"The geopolitical tensions in the Middle East (violent protests in Gaza, uncertainty over the Iranian nuclear agreement) point to solid demand for gold as a safe haven, as does the Korea conflict that is flaring up again," the bank said.

But immediate price reaction Wednesday was muted, puzzling some investors. Gold overnight rose to a peak of a little over $1,296 before resuming its recent descent.

Copper prices were mixed before turning slightly higher. July-dated contracts rose 0.1% to $3.0615 a pound. Traders were content to keep copper around the low end of a recent price range, analysts said. Concerns the Chinese economy could slow in the year ahead has capped investor demand for the industrial metal.

Write to Benjamin Parkin at [email protected] and Georgi Kantchev at [email protected]