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Gold Prices Fall Even with Negative US Economic Data

September 15, 2016 at 18:45 by Andrew Moran

Gold was unable to start a rally on Thursday. Despite weak US economic data, the yellow metal could not muster any gains. The likelihood of the Federal Reserve raising interest rates next week remains low, but the precious metal is on the defensive as it continues to be very sensitive to a rate hike at the moment.

December gold futures declined $6.10, or 0.46%, to $1,320.00 per ounce at 18:15 GMT on Thursday. Gold has been bearish for most of September as the Federal Open Market Committee (FOMC) meets later this month.

Silver remained relatively flat. December silver futures rose $0.04, or 0.23%, to $19.11 an ounce. Silver has been having a lackluster performance since August, when it trimmed around 8% of its value.

The yellow metal failed to launch a rally from negative domestic economic data. August retail sales fell 0.3% for the first time in five months. The declines in sales were found across the entire retail sector, including home-improvement centers, gasoline stations, and department stores.

Investors are worried that this may be a sign that third-quarter growth may not actually be as strong as previously expected. The first two quarters of the year have already been quite tepid with 1.1% and 1.2% gross domestic production (GDP) expansions.

Ever since US central bank officials met for their annual summer retreat in Wyoming, there has been a plethora of terrible domestic economic news. The August jobs report was worse than expected, auto sales fell in July, factory output in August dipped, and the stock market has taken a beating with the anticipation of a September rate hike.

The FOMC will hold meetings on September 20 and 21. The Fed will have two more meetings afterwards: November 1 and 2 as well as December 13 and 14.

According to the CME Group FedWatch tool, there is just a 12% chance of a rate hike this month. This is down from as high as 40% just before the Labor Day weekend. There have also been contradictory opinions from various central bank officials over the past two weeks.

Gold is impacted from rising rates because it does not offer investors any yield. When rates go up, traders seek out riskier investment options, such as oil and stocks, and vehicles that pay a yield, like bonds.

If you have any questions and comments on the commodities today, use the form below to reply.

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