New York gold dropped sharply on Monday, declining to a low of $879 before recovering to $887.20 an ounce. Silver tumbled by 61 cents, closing at $16.79 an ounce.
Strength in the US dollar against a collapsing euro was sited as the precipitating factor. The dollar was helped by expectations the Federal Reserve will hold interest rates unchanged at its meeting this week.
“Gold is likely to test the $850 level as the Federal Reserve fails to feed the dollar bears,”said Ned Schmidt, editor of the Value View Gold Report
“That price, given the longer-term bear market for the U.S. dollar, would represent a buying opportunity.”
A stronger US dollar typically hurts gold, which is often bought as a hedge against inflation and weakness in US currency. In addition, gold is more expensive in other currencies when the U.S. dollar rises.