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Gold Weakens 1%, Poised for Weekly Loss on Hawkish Fed

November 9, 2018 at 14:35 by Andrew Moran

Gold futures are weakening at the end of the trading week and are poised for a weekly decline. This week, the yellow metal has taken a breather from its  stellar October performance, impacted by a bullish Federal Reserve and a rallying greenback. Gold prices took another hit on positive economic data.

December gold futures tumbled $13.70, or 1.12%, to $1,211.40 per ounce at 13:04 GMT on Friday. Gold prices will record a weekly loss of just under 2%, bringing their year-to-date slide to 9%.

Silver, the sister commodity to gold, is cratering to finish the trading week. December silver futures plunged $0.22, or 1.53%, to $14.20 an ounce. The white metal is also on track to post a weekly drop of 3.6%, adding to its 2018 loss of 18%.

The US central bank did not raise interest rates at its Federal Open Market Committee (FOMC) policy meeting this week, but officials did signal that the Eccles Building remains on a tightening course over the next year. It is widely anticipated that the Fed will raise rates at its December FOMC meeting.

The US dollar continues to rally in 2018, rising 0.15% to 96.76 on Friday. The greenback, which is up more than 5% on the year, is set to report a 0.25% weekly jump.

Gold is sensitive to both trends. A rising-rate environment lifts the opportunity cost and sends investors into assets that produce a yield and a stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

On the data front, domestic wholesale prices climbed 0.6% in October, the biggest increase in six years. The boost to the producer price index (PPI) was led by higher food, gasoline, and chemical prices. Despite the higher PPI, officials say inflation is mostly in check because the year-over-year PPI is lower than it was this past summer when it surpassed 3%.

The rest of the metals market is also seeing an ocean of red. December copper futures shed $0.04, or 1.4%, to $2.69 per pound. December platinum futures slid $7.40, or 0.85%, to $862.90 an ounce. December palladium futures plunged $16.40, or 1.47%, to $1,101.50 an ounce.

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