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Gold Trades Sideways on Fed, US Dollar Pressure

October 22, 2018 at 17:07 by Andrew Moran

Gold futures are trading sideways to kick off the trading week as a hawkish Federal Reserve and a rallying US dollar are applying pressure on the yellow metal. After recording its third straight weekly gain, gold prices have fallen below a key $1,230 resistance level.

December gold futures tumbled $4.30, or 0.35%, to $1,224.40 per ounce at 16:15 GMT on Monday. Last week, gold posted a modest 0.8% weekly jump, advancing nearly 2% over the last month.

Silver, the sister commodity to gold, is also slumping to start a new week of trading. December silver futures slipped $0.075, or 0.51%, to $14.57 an ounce. The white metal reported a tepid gain of 0.3% last week, rising more than 2% over the last month.

Precious metals are facing pressure on Monday on a rally US dollar as the greenback jumped 0.37% to 96.02. A stronger buck is bad for commodities pegged in dollars because it makes it more expensive for foreign investors to purchase. The greenback has rallied for much of 2018, serving as a safe-haven asset for investors across the globe as the world economy weathers the international trade storm.

The equities market is sending metals lower, too, as European shares surged. The financial market took cues from a positive Moody’s rating on Italian sovereign debt and the Chinese government offering stimulus to spur economic growth and battle through American tariffs on domestic goods.

Investors are reversing their shorts as traders slashed their net short positions by more than 65,000 contracts to 37,372 contracts, the smallest total since July, according to the US Commodity Futures Trading Commission (CFTC).

But the gold market is also taking slight hit on rising expectations of interest rate hikes in a couple of months. The US central bank is widely anticipated to raise rates at the December Federal Open Market Committee (FOMC) policy meeting. The yellow metal is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into assets that provide yields.

In other metal commodities, December copper futures were flat at $2.77 per pound. December platinum slumped $11.80, or 1.41%, to $824.20 an ounce. December palladium futures spiked $36.50, or 3.41%, to $1,106.40 per ounce.

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