SAN FRANCISCO (CBS.MW) -- Gold futures closed back under $364 an ounce Wednesday, dropping nearly $3 in value as gains in the stock market and the dollar put a damper on the metal's trading session.
Many traders, anticipating a fallout in the currency markets, will be watching the European Central Bank's meeting Thursday in Frankfurt. It is expected to cut rates be either a quarter-point or a half-point. See related story.
On the New York Mercantile Exchange, gold for August delivery closed at $363.60 an ounce, down $2.70. The contract, which already lost 80 cents on Tuesday, fell to a low at $362.70 earlier in the session.
"The market is focused on deflation, but I believe the gold bugs are preparing themselves for higher prices longer term," said John Person, head financial analyst at Infinity Brokerage Services.
"The rewards and the outlook for gold to reach $400 outweigh the risks and probabilities in this current market climate that it will see $330," he said.
The dollar strengthened against the euro, but weakened against its Canadian counterpart and the Japanese yen. The currency's value is key to precious metals because foreign traders must exchange their currencies to buy dollar-denominated gold on U.S. markets.
Meanwhile, U.S. stocks were amid higher positive data on productivity and the services sector. The Dow Jones Industrials ($INDU: news, chart, profile) traded up 87 points as 9,010. See Market Snapshot.
Newmont executive brightens gold's view
Speaking at the London Bullion Market Association's annual conference in Lisbon Wednesday, Wayne Murdy, chief executive of Newmont Mining (NEM: news, chart, profile), said he expects gold prices to maintain their upward momentum for the next few years because of the weak dollar and low interest rates.
"We have low interest rates; that is good for gold. We have a weak U.S. dollar, and the U.S. government sees it's going to remain that way for some time; that is good for gold," he said.
However, some analysts at the conference offered a bearish picture for prices, predicting that gold prices will fall on the back of weaker jewelry demand.
