Gold falls in anticipation of interest rate hike

Javier Stokes
December 14, 2017

Gold prices fell Tuesday for a third-straight session, marking their lowest settlement in almost six months ahead of the Wednesday Federal Reserve decision on interest rates and hints on the course for policy in 2018, MarketWatch reported.

The Fed's policy statement and latest economic projections are due at 1900 GMT.

Gold is highly sensitive to rising US interest rates as these increase the opportunity cost of holding non-yielding bullion and boost the dollar, in which it is priced. "We're expecting a rate hike", the trader said.

The US dollar stood near a four-week high against a basket of currencies on Wednesday after strong US wholesale price figures kept the Fed on track for a widely-expected rate rise this week and more in 2018. US gold futures were 0.2 percent lower at $1,244.40.

Yellen's successor, Fed Governor Jerome Powell, has hinted that he has a cautious approach to rate increases.

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"If the Fed comes out of the gate with more hawkish views on the economy and see inflation improving, it could impact the dollar index".

The Jones victory could be bullish for gold and bearish for the dollar, a Hong Kong-based trader said, adding that the recent dollar strength could yield some profit taking, in turn helping gold.

Global shares were close to record highs, continuing a rally that has attracted investment away from gold.

Analysts at ScotiaMocatta said momentum indicators showed gold could reach its July low of $1,204.90.

Among other precious metals, silver rose 0.4 percent to $15.77 an ounce. Platinum fell for its eight straight session, down 0.9 percent at $876.60 an ounce, after earlier touching its lowest since February 2016 at $868.80. COMEX Gold fell under the $1250 per ounce barrier yesterday and now trades at $1245 per ounce, down marginally on the day.

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