Commodities: Gold on back foot with risk potential for further falls

Gold is on the back foot on Tuesday afternoon as dollar strength drives the nil-yielding safe-haven metal lower, with market watchers suggesting it may yet break even further south.

At about 15:08 GMT, on Comex, gold was down 0.56% to 1218.6 an ounce, with silver down 1.4% to $17.53 an ounce and copper down 0.92% to 262.75 cents a pound.

The dollar-spot index was up 0.22% to $101.860.

Craig Erlam, senior market analyst at Oanda, said greenback strength had finally taken its toll on gold, perhaps aided by a slightly improved European political mood.

"The yellow metal is looking vulnerable to a possible break below $1220, which could trigger another move back towards $1200 or $1180," said Erlam in a note.

SwissQuote added that the defensive asset was showing no signs of reversing its bearish course after recent pullbacks.

"The positive mid-term trend has been broken. It is unlikely that the metal will test again $1263 resistance," said SwissQuote in a note.

Other market watchers, among them analysts Mike van Dulken and Henry Croft at Accendo Markets, observed that investors were looking to the log-jam of economic news due at week's end.

This ranged from UK Chancellor Philip Hammond's spring Budget, a European Central Bank meeting and various data sets due out both sides of the Atlantic Ocean and English Channel.

Brexit and Euro-zone elections also remained sources of nerves for the markets, while in the US the timing of the Federal Reserve's rate hike programme is centrestage.

London Metals Exchange-traded three-month industrial metals were all lower, with zinc and copper falling more than aluminum and tin.

Meanwhile, Nymex-listed West Texas Intermediate crude was up 0.73% to $53.59 a barrel, while Intercontinental Exchange-traded Brent was up 0.73% to $56.42 a barrel.

"Crude Oil prices are engineering a recovery having touched one month lows last week as the tug of war between OPEC and US producers continues," said van Dulken and Croft in a note.

"An emerging trend of rising lows support is helping to keep prices off Thursday's lows, however gains are capped as a stronger USD is hampering investor demand for the black stuff."

"Crude oil remain contained in sideways range (even though positive) unable to mount a serious
challenge to $55.24 resistance," said SwissQuote.

"We rule out for the moment any correction towards $49.61."

On the agriculturals front, Chicago Board of Trade-priced corn was down 0.66% to 376 cents a bushel, while wheat fell 1.36% to 452.25 cents a bushel.

ICE-quoted cocoa was lower 0.16% to $1932 a MT, and cotton No.2 fell 0.33% to 78.85 cents a pound. Live cattle was up 0.24% to 115.83 cents a pound.