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Gold Retreats from 1-Year High amid Stronger US Dollar, Easing Hurricanes

September 11, 2017 at 16:30 by Andrew Moran

Gold futures are retreating from their best levels since September 2016. As the US dollar strengthens, North Korean fears deteriorate, and hurricane tensions ease, investors are exiting the yellow metal and heading back into equities.

December gold futures tumbled $13.50, or 1.00%, to $1,337.70 per ounce at 16:14 GMT on Monday. Gold prices have been trading at one-year highs as traders sought a safe-haven asset. The precious metal recorded a 1.6% weekly gain last week.

Silver, the sister commodity to gold, is also bleeding red ink to kick off the trading week. December silver futures dipped $0.17, or 0.95%, to $17.95 an ounce.

Precious metals were affected by a rising US dollar as the greenback advanced 0.5%. A stronger dollar is bad for dollar-denominated commodities like gold and silver because it makes it more expensive for foreign investors to purchase. The US dollar has been trading lower for much of 2017.

Investors were jubilant on Monday when Hurricane Irma was downgraded to a tropical storm. The weaker-than-expected weather event made landfall in Florida over the weekend, but its impact was limited. That said, Irma is still expected to be one of the five most costly hurricanes in US history.

Despite reports that it had planned to test an intercontinental ballistic missile, North Korea failed to launch anything over the weekend. This has many traders coming to the conclusion that the worst is over and that Pyongyang-Washington tensions have eased up in recent weeks.

With a surging greenback, diminishing geopolitical risks, a stronger labor market, and modest economic data, is the Federal Reserve on track to raise interest rates at the next Federal Open Market Committee (FOMC) meeting? According to the CME Group FedWatch tool, there is a 40% chance of a third 2017 rate hike at December’s policy meeting. Gold is generally sensitive to a rising-rate environment because it increases the opportunity cost and sends investors into yield-bearing instruments.

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