Gold price takes a hit as investors increasingly look for a Fed hike in Dec.
London (Oct 29) Gold prices fell sharply on Thursday, a day after the Federal Open Market Committee left the door open to hiking interest rates at its December meeting.
“An absolutely enormous intraday turnaround has scuppered what looked to be a burgeoning rally once more. This is the second time in 4 sessions this has happened (the first being on Friday in the wake of the PBOC rate cut),” Richard Perry, analyst at Hantec Markets, in a note.
Gold for December delivery GCZ5, -1.59% dropped $15.70, or 1.3%, to $1,160.30 an ounce. Gold settled at a one-week high on Wednesday, but then turned lower in electronic trading after the Fed statement was released at the close of the central bank’s two-day meeting on Wednesday.
The market had been fairly convinced that the Fed would hold off on interest-rate hikes this year, but a more hawkish-than-expected statement took the market by surprise. The CME Group’s FedWatch tool shows investors are pricing in a 42.6% chance of a rate increase at the December meeting, scheduled for Dec. 15-16.
Gold has been a beneficiary of the Fed’s ultraloose monetary policy because commodities like gold don’t offer interest. The dollar also saw a sharp move higher on Wednesday, and that also can drag on dollar-denominated currencies like gold. The dollar DXY, -0.20% hit the highest level against the euro in nearly three months on Wednesday, but has since retraced some of those gains.
“The Fed hint that it may hike in December has been to the detriment of all commodity prices, as the dollar index surged ahead in the wake of the statement. For now, the market seems fairly confident that December is literally D-Day; but then the market was pretty confident back in September too,” said Brenda Kelly, head analyst at London Capital Group, in a note.
December silver futures SIZ5, -2.60% fell 35 cents, or 2.2%, to $15.94 an ounce, while December copper HGZ5, -1.06% lost 1 cent to $2.360 a pound.
Palladium for December delivery PAZ5, -1.62% dropped $13.35, or 2%, to $672.75 an ounce. January platinum PLJ6, -1.35% fell $11.90, or 1.2%, to $1,001.70 an ounce.