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With December Rate Hike Looming, Gold Futures Stay Flat

October 17, 2016 at 17:15 by Andrew Moran

Gold futures are flat to start off the trading week. With a December rate hike looming, the yellow metal is trading water as investors are looking for some bargains in the bullion market.

December gold futures increased just $1.20, or 0.10%, to $1,256.70 per ounce at 16:49 GMT on Monday. Despite maintaining a losing streak, gold prices had actually advanced 0.3% last week. This happened one week after posting a 5% weekly loss. Gold has climbed more than 20% so far this year.

Silver has barely moved. December silver futures rose a tepid $0.004, or 0.02%, to $17.44 an ounce. Like its gold counterpart, silver has been performing horribly since late September. Silver prices have gone up roughly 40% year-to-date.

October is historically a terrible month for gold as it has lost on averaged 0.1% over the years.

The yellow metal was able to make a slight gain from the US dollar paring some of its recent gains. Gold also went up after the September US producer price index (PPI) recorded its biggest year-on-year increase since December 2014. Gold was unable to put forward anymore offense after a report found that US retail sales gained 0.6% last month.

Also, with Hillary Clinton sniffing victory in November’s US presidential election, the safe haven status of gold slightly diminishes as investors view the former Secretary of State as more of a status quo candidate.

In addition, as the market prepares for the Federal Reserve to raise interest rates in December, traders are gradually moving away from precious metals. Some experts are forecasting a sharp selloff just before the rate hike, which would be the first one since December 2015.

Gold is highly sensitive in a rising-rate environment as it increases the opportunity cost of holding gold, which does not offer any yield to investors. Also, gold has been negatively impacted by a surging greenback, which makes the yellow metal more expensive for foreign investors. When both instances unfold, investors allocate their resources to bonds, oil, and stocks.

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