As the U.S. Dollar strengthens, gold falls. The two usually have an inverse relationship. Dollar demand has been rising since the Fed announced on Wednesday that it will be ending quantitative easing and the slowdown of the U.S. economy was temporary, thereby giving optimism that one of the world’s strongest economies will slowly recover.
Meanwhile, investor fears have somewhat calmed over the Greek debt crisis as a pledge by European Union leaders to stabilize the region’s economy cut demand for the precious metal as a safe haven. EU leaders vowed to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of budget cuts next week.
Gold, which typically moves counter to the greenback, slid down to $1,504.73 from Wednesday’s high of $1,557.88 as slumping oil prices drove commodities lower.
“A stronger dollar is normally negative for gold,” said Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. “There is temporarily less urge to buy gold as a safe haven.”