The dollar rose to a four year high against a basket of major currencies on Wednesday, after Republicans won control over both chambers of the US Congress for the first time since 2006, lifting investor expectations for more pro-business policies.
Gold languished near its lowest level since April 2010 on Thursday as investors dumped the safe-haven metal amid strength in the dollar and equities, with markets now fearing $1,000 an ounce as the next target level.
The sell-off in gold began last Friday, when the metal broke through USD 1,180 - the lowest level gold had fallen to during last year's 28 percent plunge.
The dollar rose to a four year high against a basket of major currencies on Wednesday, after Republicans won control over both chambers of the US Congress for the first time since 2006, lifting investor expectations for more pro-business policies.
Weakness in the euro as investors awaited the European Central Bank's policy meeting, and last week's surprise move by the Bank of Japan to expand its stimulus measures have also provided a boost to the greenback.
Long dollar trades are a no-brainer in the current environment where the Bank of Japan and European Central Bank are keeping the stimulus tap running, while the Federal Reserve has just turned off its massive bond-buying programme.
Even with gold prices dropping to near 4-year lows, buyers across Asia have failed to show enthusiasm for the cheaper prices, preferring instead to wait on the sidelines.
When gold prices are in a slump, Chinese buyers in particular, eyeing a bargain, traditionally move in and stop the rot. But that doesn't seem to be happening this time around. In the biggest consumer of gold, local premiums - an indicator of demand - failed to pick up any big way.
Prices on the Shanghai Gold Exchange had fallen to a discount to the global price on Monday but recovered to a premium of USD 1-USD 2 an ounce on Tuesday. But they are still far short of the USD 50-plus premiums seen last year.
For Gold, test of the USD 1,000 level could be on the cards following a break of support at USD 1,150 an ounce, a key retracement level.
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