Gold price down on stronger U.S. dollar

Chicago (Oct 20)  Gold futures on the COMEX division of the New York Mercantile Exchange fell Monday as the U.S. Dollar showed strength.

The most active gold contract for December delivery lost 10.3 U.S. dollars, or 0.87 percent, to settle at 1,172.80 dollars per ounce.

The precious metal was put under pressure as the U.S. Dollar Index rose Monday. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the U.S. dollar, becomes more expensive for investors.

Gold was put under further pressure as a report released by the National Association of Home Builders showed its Housing Market Index rising to 64 in October. Analysts noted this is the highest reading of this measure since 2005. This report may also raise expectations for the housing starts report due out Tuesday.

The positive U.S. data are unlikely to be a major factor in the long-expected U.S. Federal Reserve's interest rate increase. Expectations were originally set for a September increase, but due to lower-than-expected U.S. inflation and tension in global markets, expectations have been pushed back to 2016, despite Fed Chairwoman Janet Yellen's statements indicating the Fed could still raise interest rates before the end of 2015.

An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest. There has not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis.

Silver for December delivery fell 27.3 cents, or 1.69 percent, to close at 15.841 dollars per ounce. Platinum for January delivery dropped 9.10 dollars, or 0.89 percent, to close at 1,014.60 dollars per ounce.

Source: ChicagfoTribune