Gold Hits Weekly Low as Dollar Rises

Gold prices continued their decline for a third consecutive session, hitting their lowest level in over two weeks today, driven by a stronger US dollar and expectations of further monetary tightening by the Federal Reserve.

Spot gold fell 1.4 percent to $3,931.54 per ounce, after earlier touching its lowest level since November 4 during the session.

Ole Hansen, an analyst at Saxo Bank, said, “Gold retreated to test key support near $3,970, as sellers focused on persistent US inflation and comments from several Federal Reserve officials leaning toward tighter monetary policy.”

Hansen added that following consumer price index readings that came in higher than expected, speculation increased that the Federal Open Market Committee might choose to raise interest rates by 50 basis points at its December meeting, despite the recent sharp drop in energy prices, which could help ease inflationary pressures in the coming months.

Data released on Tuesday showed that US consumer prices rose more than expected in October, pushing the dollar to its highest level in 19 months and increasing traders’ bets on further tightening by the US central bank.

According to the CME’s FedWatch tool, markets currently price in an 89 percent probability of a 25-basis-point rate hike in December, while the likelihood of a larger 50-basis-point increase rose to 11 percent from zero prior to the inflation data release.

Although gold is typically viewed as a hedge against inflation, rising interest rates reduce its appeal because the metal yields no return. A stronger dollar also weighs on gold, making it more expensive for buyers holding other currencies.

Among other precious metals, spot silver fell 1.3 percent to $50.99 per ounce, and spot palladium dropped 0.2 percent to $1,025.81 per ounce after recording its highest level since October 22 on Wednesday.