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Gold, Silver Plummet as US Dollar Gains from Political Chaos in Europe

November 20, 2017 at 17:43 by Andrew Moran

Gold and silver futures are plummeting to start the trading week. The precious metals are trading sharply lower as the US dollar makes considerable gains amid the political turmoil unfolding in Europe.

December gold futures tumbled $19.30, or 1.49%, to $1,277.70 per ounce at 16:26 GMT on Monday. Gold prices are still hovering around one-month highs. The yellow metal may be poised to endure its biggest one-day loss in 2017, but it comes as gold prices recorded a weekly gain of roughly 1.5% last week.

Silver, the sister commodity to gold, is also slipping to kick off the trading week. December silver futures plunged $0.47, or 2.75%, to $16.89 an ounce. This comes as the white metal posted a weekly advance of 0.1% last week.

The metals are sliding on a firmer US dollar as the greenback surged 0.05%. The euro, meanwhile, fell 0.05%. The greenback is benefiting from political uncertainty occurring in Europe, especially in Germany, where Chancellor Angela Merkel’s conservative alliance is on the brink of collapsing as she struggles to form a coalition majority in the parliament. The Free Democratic Party and the center-left Greens have ended negotiations with the conservatives, which could trigger a new election. Precious metals were up slightly before paring those gains.

A stronger US dollar is bad for commodities like gold and silver because it makes it more expensive to purchase.

According to new data from the US Commodity Futures Trading Commission (CFTC), hedge funds and money managers have increased their net long positions in gold and silver contracts in the week ending November 14.

Traders are still betting that the yellow metal will break above the $1,300 before the end of the year, particularly if domestic political turmoil continues. US President Donald Trump appears to be having difficulty in passing tax cuts in the Senate, and he did not confirm if he will repeal the Affordable Care Act (ACA)’s health insurance mandate as part of his tax reform plan.

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