NEWS / Monetary Policy

Gold drops as stronger dollar prompts sales

SYDNEY, June 1 - Gold dropped further on Thursday as holders of the metal sold out in response to a strengthening U.S. dollar.

-- Spot gold <XAU=> fetched $643.00/$644.50 an ounce at 0130 GMT, down from the Sydney opening price of $644.60.

-- Dealers said the rising dollar could force a test of gold's next technical support level, widely marked at $640.00 a ounce.

-- In overnight trading, gold sank to $644.40/645.20 an ounce, way below Tuesday's New York close of $656.80/7.60. Wednesday's afternoon bullion fix in London reached $653.

-- "The dollar's been pulling gold down," a dealer said.

-- Spot markets for precious metals were also hurt by sharp drops in metals futures in the last Comex session.

-- U.S. gold futures tumbled 1.7 percent, while silver sank 4.7 percent, knocked by month-end selling due to seasonal weakness as well as unfavourable moves in the dollar and oil.

-- The dollar dipped against the yen on Thursday but clung to much of the gains made after minutes from the Federal Reserve's latest policy meeting suggested the central bank was still concerned about inflation.

-- In early Tokyo trade, the dollar stood at 112.55 yen <JPY=>, down slightly from the late New York level of around 112.65 yen and Wednesday's high near 112.70 yen. The euro was little changed at $1.2810 <EUR=>.

-- Spot silver dropped 10 cents from the late New York quote to $12.48/$12.58 an ounce.

-- Spot platinum <XPT=> was down $3 at $1,243/$1,250 an ounce.

-- Spot palladium <XPD=> was down $6 at $342/$349 an ounce.