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Gold Touches 3-Month Low, Silver Plunges to Under $18

October 5, 2016 at 17:11 by Andrew Moran

It has not been a good start to October for both gold and silver.

Gold and silver are continuing their freefall on Wednesday. Traders maintained the trend of selling off their bullion holdings as the US dollar strengthened and there has been a lack of negative economic data. The precious metals have steadily been on the decline since late September.

December gold futures dipped $3.80, or 0.30%, to $1,265.90 per ounce at 16:45 GMT on Wednesday. Gold has not traded this low since early July. The yellow metal made headlines on Tuesday when it went under the important $1,300 threshold.

Silver is not doing any better. December silver futures tumbled $0.16, or 0.90%, to $17.16 an ounce. Silver has also not traded at this level since the beginning of July.

The strong start to 2016 has allowed gold and silver to maintain a stellar performance year-to-date. Gold has advanced 20%, while silver has gone up 40%.

A surging greenback, weak demand from China, and long speculative trading have contributed to this week’s significant decline in gold and silver. A higher US dollar is bad news for gold because it makes the yellow metal more expensive for foreign investors to own.

Moreover, the likelihood of the Federal Reserve raising interest rates in December is not helping either. A rising-rate environment is bearish for gold because it does not provide investors with any yield, which prompts them to seek out yield bearing investment vehicles, like bonds, oil, and stocks.

October is typically a weak month for gold. The yellow metal has averaged a loss of 0.1% over the years.

If September’s jobs numbers are worse than projected then it could support gold and silver. The US jobs report will be published on Friday. Also, a tepid third quarter gross domestic product (GDP) could advance the precious metals. The Atlanta Federal Reserve Bank forecasts a July-to-September GDP of just 2.2%.

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