Gold extends losing skid to nine, one day after falling to 5-yr low

Investing.com -- One day after crashing more than 2.2% to fresh five-year lows, gold futures inched down on Tuesday for its ninth straight loss in spite of a retreating dollar.

On the Comex division of the New York Mercantile Exchange, gold for August delivery traded in a tight range between 1,098.30 and 1,108.60 before closing at 1,106.00, down 0.80 or 0.07% on the session. Gold futures are down approximately 8% since peaking above $1,200 an ounce in late-June.

On Monday, gold plunged more than 5% in a matter of minutes in early morning Asian trade when it fell below $1,120, triggering a fresh batch of sell orders. Over the weekend, the People's Bank of China tightened regulations on internet financing in further efforts to bolster its crashing equities markets. In recent weeks, Chinese investors have lost approximately $3 trillion in the stock market amid the slowest growth in the world's second-largest economy in over a decade.

The stimulus measures came hours after China released data on its gold holdings for the first time since 2009. While Chinese gold holdings surged about 60% to 1,658 metric tons over the six-year span, the figure still pales in comparison to the nation's increasing stockpile in foreign exchange reserves. Chinese gold reserves represent only 1.5% of its forex reserves, dampening optimism that the world's second-largest economy can provide a further boost to the global gold market.

China is the world's largest producer and second-largest consumer of gold behind India. On Tuesday, Au99.95% on the Shanghai Gold Exchange fell mildly by 2.1 yuan to 221.36 a kilogram.

In many ways Monday's rout represented a perfect storm of sorts for the continuing depreciation of gold. Historically, gold is viewed as a safe haven for investors in periods of severe economic instability. Over the last week, temporary accords in the Greek Debt and Iranian Nuclear negotiations, coupled with renewed diplomatic relations with Cuba has reduced volatility in the global economy. Greece repaid a €4.2 billion loan to the European Central Bank on Monday, providing one of the clearest indications in months that a Grexit from the euro can be averted.

At the same time, the dollar rallied to three-month highs on Monday amid further hints that the Federal Reserve could lift interest rates in September. Gold struggles to compete with high-yield bearing assets in rising rate environments since it is not attached to interest rates. Dollar-denominated commodities such as gold also become more expensive for foreign purchasers when the dollar appreciates.

The appreciation of the dollar along with the completion of the Iranian Nuclear deal has pushed U.S. crude futures down more than 12% over the last month to around $50 barrel. Lower energy prices ostensibly weigh on headline inflation, which had been ticking up in recent months before the sharp decline. The drop in crude prices also lessens the need for gold as a hedge against inflation.

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The U.S. Dollar Index, which measures the strength of the greenback against a basket of six other major currencies, fell more than 0.7% to an intraday low of 97.37 before inching up to 97.40 in U.S. afternoon trading.

Silver for September delivery gained 0.074 or 0.50% to 14.832 an ounce.

Copper for September delivery gained fell 0.006 or 0.25% to 2.476 a pound.