Precious Metals Market Report by Bill Musgrave – American Gold Exchange
Gold fell 1.2% to close just under $1,208 as a stronger dollar and weaker oil reduced demand for the metal as an alternative store of value.
The dollar firmed against most major rivals after upbeat U.S. manufacturing in November increased speculation that the Fed will amend its forward guidance on interest rates when it meets this week. For months, the FOMC has pledged to keep rates near zero “for a considerable time” after quantitative easing concluded in October, a phrase generally interpreted to mean no increases until mid-2015.
Growing momentum in the economy, however, is leading traders to think a change may be afoot in the next policy statement, expected on Wednesday, suggesting the possibility of a sooner rate increase. Rising rates will support a stronger dollar, which would weigh on gold and other commodities denominated in it for international trade by making them more expensive to users of other currencies.
Crude oil fell to nearly $60 a barrel, compounding last week’s 10% plunge, after OPEC said it will not cut production to boost prices. Falling oil typically signals lower expectations for inflation, pressuring gold because it is widely used as an inflation hedge.
Hedge funds are at their most bullish on gold since August, raising net-long positions for the fourth straight week, the longest stretch since last August, as tumbling U.S. and global equity markets are causing flights to safety.
The other precious metals tracked gold lower. Silver dropped 3.2% while platinum and palladium lost 1.3% and 1.7%, respectively.
At the Comex close: February gold fell $14.80 to $1,207.70; February silver dropped 56 cents to $16.50; January platinum lost $16.30 to $1,215.20; and March palladium shed $14.55 to $802 an ounce.
