Gold futures prices started Wednesday under pressure as a rally in the dollar continued to erode the value of the yellow metal. Gold futures have also felt the pinch of investors looking to rotate out of alternative assets classes and back into stocks. As prices fell, Bullionvault Tweeted: “#Gold drifting in absence of economic collapse.”:
The 2013 rotation out of fixed income products and money markets has also created headwinds for precious metals and grains. Equity funds experienced inflows of approximately $70 bln during the month of January compared with $23 billion in all of 2012. Although the majority of the capital flows that made it into the equity market came from deposits, gold futures and ETF experienced negative capital flows.
The dollar continued to generate headwinds for gold futures prices, despite continued negative economic data points seen in Europe. Industrial production declined in the EU, reflecting the strength of a strong Euro. Wednesday Eurostat s reported that Eurozone industrial production rose 0.7% on the month in December, compared with a 0.7% monthly decline in November. On an annualized basis, output dropped 2.4% after a 4.0% decline in November.
An increase in the payroll tax in the U.S. insured that retail sales remained subdued putting pressure on purchases of gold at the retail level. According to the Department of Commerce, Retail Sales declined .1% in January, which was in line with economists’ expectations. Excluding automobiles, retail sales increased by .2%, which was slightly better than expectations.