Gold Lower as Fed Rate Hike Puts Pressure on Metal

Gold futures were wavering in early trade Tuesday, a day after the precious metal snapped a seven-session streak of declines.

December gold GCZ5, -0.06% which had been swinging between gains and losses, was 30 cents, or less than 0.1%, higher at $1,088.20 an ounce early in the U.S. day. On Monday, gold managed to stay above a five-year low of $1,085.50 an ounce, to finish at $1,087.70 an ounce.

However, a strong dollar as measured by the ICE U.S. Dollar Index DXY, +0.37% —a gauge of the buck’s strength against a basket of six rival currencies—was 0.4% higher on Tuesday, weighing on dollar-denominated metals. A stronger greenback makes buying metals priced in dollars more expensive to buyers using other currencies.

Gold has been under significant pressure on the back of a heightened belief that the Federal Reserve will lift benchmark interest rates in the middle of December. That could diminish the appeal of precious commodities, which don’t offer interest.

Gold’s moves Tuesday come as analysts continue to harbor a muted outlook for the precious metal. UBS analyst Joni Teves pointed to declining demand in China—the world’s No. 2 economy and one of the biggest importer of commodities—as a headwind to gold’s price.

via MarketWatch

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza