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Gold Prices Poised for Seventh Drop in Eight Sessions

October 11, 2016 at 17:15 by Andrew Moran

With the rising prospect of a Federal Reserve rate hike in December and a firming US dollar, gold prices are continuing to drop. The yellow metal is poised to experience its seventh decline in eight trading sessions as positive economic conditions are raining on the bullion parade.

December gold futures dipped $1.70, or 0.13%, to $1,258.70 per ounce at 16:50 GMT on Tuesday. Gold has been in a freefall since the Federal Open Market Committee (FOMC) voted to leave interest rates unchanged in September. Last week, the value of gold declined 5%. It is now trading at a level unseen since late May.

Silver is not performing any better. December silver futures tumbled $0.10, or 0.62%, $17.55 an ounce. The last time silver traded this low was in early June.

Gold was unable to make any gains from last week’s lower-than-expected September jobs report. It has also been battered due to a climbing greenback and rising expectations that the US central bank will raise interest rates in December. The growing odds could reduce the demand in precious metals until then.

The next time the FOMC will meet will be on November 1 and 2 and December 13 and 14. According to the CME Group FedWatch tool, there is now a 70% chance of a December rate hike.

Also, investors will comb through the Wednesday release of the FOMC minutes from last month’s meeting.

The yellow metal is highly sensitive to both a strong US dollar and rising rates. A firmer dollar makes gold more expensive for foreign investors and rising rates increase the opportunity cost of holding non-yield-bearing gold. Traders usually dive into bond, oil, and stocks at this time.

October is typically a terrible month for gold. Historically, gold has posted a 0.1% loss in the month. With the increasing likelihood of Hillary Clinton winning the presidential election, which is seen as a boon for Wall Street since she will maintain the status quo, gold’s decline could unfold even more.

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

One Response to “Gold Prices Poised for Seventh Drop in Eight Sessions”

  1. Ivan

    Gold gained slightly with Fed minutes from the September meeting on tap later in the day to set the tone. Market players will be turning their attention to Wednesday’s minutes of the Federal Reserve’s September policy meeting for fresh clues on the timing of the next U.S. rate hike

    [Reply]

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