NEW YORK (MarketWatch) -- Gold futures dropped Monday after a senior Treasury official said that the U.S. supports the proposed sale of a part of the gold reserves held by the International Monetary Fund.
Gold for April delivery fell $7.30 to end at $940.50 an ounce on the New York Mercantile Exchange.
"The support that the U.S. is now apparently lending to the recently proposed IMF gold sales -- which is a departure from its previous negative stance on such sales -- is causing a few to take profits," said Jon Nadler, senior analyst at Kitco Bullion Dealers, in a research note.
"It is believed that the sales, slated to commence in April, might bring some 400 tons of gold out of the IMF vaults and onto the market," Nadler said.
David H. McCormick, under secretary for international affairs at the Treasury Department, said Monday that the Bush administration considers the plan to sell 12.9 million ounces of gold as "probably the most viable" option to ensure the long-term funding of the IMF, Dow Jones Newswires reported Monday.
McCormick said that there is "some confidence that there will be some support for this" among members of the U.S. Congress and "broad-based support" for the plan among members of the Group of Seven industrial nations, according to the report.
The IMF ranks as the number three holder of gold in reserves, after the U.S. Federal Reserve and Germany's Bundesbank.
The U.S. Congress could block the administration's initiative, said Marc Chandler, currency strategist at Brown Brothers Harriman & Co., in a research note.
"Previously Congress opposed IMF attempts to sell gold in both 1999 and 2005, but
McCormick hinted at having Congressional support now," Chandler said.
"The price of gold fell on the news, which also corresponded to the slightly better than expected existing home sales in the US and a bounce in the U.S. dollar," he said.
Dollar gains
On the currency markets, the dollar got a boost against major rivals Monday, after U.S. home-sales data were not as downbeat as many investors had expected. See Currencies.
The dollar index, which measures the greenback against a basket of six major currencies, was at 75.536, up from 75.480 before the data and 75.514 in Friday's late U.S. trading.
Resales of U.S. homes and condos dropped 0.4% in January to a seasonally adjusted annualized rate of 4.89 million, even as inventories of homes on the market rose, the National Association of Realtors reported Monday.
It was the lowest sales pace since the real estate group began tracking combined sales in 1999 but was stronger than the 4.80 million pace expected by economists surveyed by MarketWatch. See Economic Report.
On Friday, gold finished down $1.40 but chalked up a weekly gain of $41.70. On Thursday, gold surged to a record high of $958.40 an ounce.
Thursday's gains pushed gold toward overbought territory, as borne out by gold appearing to struggle to rally to close out the week, said James Moore, an analyst at TheBullionDesk.com.
However, "the speed with which the metal recovered from its dip suggests plenty of players remain on the sidelines keen to buy dips, and that rate-cut expectations and rising inflationary pressures will continue to draw investment demand," Moore said in a research note
