Gold whipped by US data

Gold has whipped violently – along with the currency markets – since the AM Fix in London at $626 per ounce. The action follows US data that first said the Dollar might weaken but then said it could steady.

First came news that US consumer prices, after falling for two months, were unchanged in November. Traders took this to mean that the Fed's interest rate of 5.25% is enough to stall inflation. So US bond prices jumped and the Dollar dipped on the currency markets.

But net capital inflows into the US rose in October, the Treasury then added. At $62.2bn they easily covered October's trade deficit. That suggests non-US investors now find US assets attractive – and a growing inflow of money should help push up the Dollar.

All this action has left gold ticking lower overall, despite heavier trading. "[Gold is] largely hemmed in by the bearish influence of a stronger US Dollar," said one analyst earlier today. "The only prevailing factor these days is definitely the Dollar strength or weakness," added another.

So which is it: Dollar strength or weakness? Dan Denning in Melbourne picks up the story – click here to read on...