Gold futures touched its lowest level since early August after the dollar strengthens on Fed’s rate hike expectations

Gold clings to third straight loss

The price of gold was dragged to a three-week low by a much stronger dollar on Thursday’s session after the statement of the Federal Reserve heightened expectations on in interest rate hike this coming December, which limited the gains of the yellow metal.

The announcement of the Federal Reserve regarding the possibilities of another rate hike this year came in as a surprise for the market because of the occurrence of poor inflation have dampened the need for such measure. OANDA’s senior market analyst Jeffrey Halley said that the Federal Open Market Committee (FOMC) was unexpectedly positive in terms of interest rate hikes in 2017 and 2018.

In reaction to the news, bond yields and the U.S. dollar touched their best level in more than six weeks. Both were also boosted when Fed released plan which suggested that it will begin to wind down its immense balance sheet in October. The dollar index was marginally higher against peers; it was 0.2 percent up against the Japanese yen.

Looking at gold prices, U.S. gold futures fell as low as 1 percent to settle at $1,302.60 per ounce for its December delivery. Spot gold edged down about 0.1 percent to finish at $1,233.31 per ounce; it touched its lowest level since late August at $1295.65 per ounce in the previous session.

Gold is fragile at interest rate hikes because of its tendency to strengthen the greenback and boost bond yields. A stronger dollar is not good for the bullion because it will make the metal high-priced for non-U.S. holders, which will further weaken the demand.

 

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