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Gold Craters to Under $1,200

November 23, 2016 at 18:02 by Andrew Moran

Gold cannot seem to catch a break in the post-election aftermath. The yellow metal is now trading at its lowest level since February as it has dipped to under $1,200 an ounce. A surging US dollar, positive economic data, and an upcoming rate hike have all negatively impacted the precious metal.

December gold futures tumbled $23.60, or 1.95%, to $1,187.60 per ounce at 16:38 GMT on Wednesday. Gold is poised to settle at a nine-month low and has lost more than $130 since the US election. Gold is now up less than 20% year-to-date.

Silver is not performing any better than its counterpart during the Wednesday trading session. December silver futures have fallen $0.30, or 1.82%, to $16.33 an ounce. Silver is trading at its lowest level since the beginning of June.

The yellow metal has been sliding on a climbing greenback thanks in part to the Dow Jones setting a record when it surpassed 19,000. The US dollar is also surging because of positive domestic economic news and traders betting that President-Elect Donald Trump will boost fiscal spending over the next four years.

It was reported that orders for long-lasting goods made in the US spiked 4.8% last month. This is from spiking demand for commercial aircraft, though business investment did not make any significant gains. Moreover, the number of Americans who applied for first-time unemployment benefits in mid-November soared by 18,000 to 251,000, but economists are not paying much attention because last week’s initial jobless claims declined to a 43-year low.

All of these factors are providing the Federal Reserve with enough ammunition to pull the trigger on raising interest rates at next month’s Federal Open Market Committee (FOMC) meeting. This would be the first rate hike since December 2015.

Gold is sensitive in a rising-rate environment because it ramps up the opportunity cost and sends investors fleeing to yield-bearing investments. When you add in a stronger US dollar, it makes it more expensive for foreign investors to purchase commodities like gold and silver.

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