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Gold, Silver Suffer Fourth Day of Losses

September 12, 2016 at 17:47 by Andrew Moran

Gold and silver are suffering their fourth consecutive trading day of losses. Due to the rising odds of a September rate hike and cautious comments from two members of the Federal Reserve, the precious metals took another major dive to start off the trading week.

December gold futures dropped $10.20, or 0.76%, to $1,342.30 per ounce at 17:15 GMT on Monday. Gold has not traded this low since August 22. Despite last week’s steep daily losses, it was able to muster a 0.8% weekly gain because of Tuesday’s performance.

Silver is also feeling the brunt of Fed policy. December silver futures fell $0.46, or 2.39%, to $18.90 an ounce. Silver has been in freefall since touching $20 early last week.

Over the past several trading sessions, gold and silver prices have taken a hit as investors bet in favor of a rate hike later this month. Prices have been further impacted from more monetary easing from central banks in Europe and Japan. In recent weeks, gold has also been affected by a stronger US dollar.

Minneapolis Fed President Neel Kashkari told CNBC on Monday that there is no urgency for the US central bank to raise interest rates at the next Federal Open Market Committee (FOMC) meeting. He stated that he wants to see more inflation before the Fed takes action.

There doesn’t appear to be a huge urgency to do anything. Do you really think raising interest rates is going to lead to higher inflation? That’s a curious economic principle.

Atlanta Fed Bank President Dennis Lockhart said in a speech to the National Association for Business Economics on Monday that he would refrain from making comments regarding monetary policy. Lockhart noted that “financial markets seem to be very sensitive to remarks of Fed speakers at the moment.” He did say that the US economy appears to be “chugging along” and that he thinks the Fed will meet its 2% inflation target.

The FOMC will meet on September 20 and 21.

If the Fed should delay a rate hike because of the wave of negative economic data then this would be a boon for gold. A loose monetary policy initiative tends to benefit gold as its allure is more appealing in a low-rate environment. In a rising-rate atmosphere, gold’s glitter fades because it does not offer any yield and higher interest rates apply pressure on the yellow metal.

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