Gold Prices Slip As Demand Wanes on Stronger Dollar
November 25, 2015 (Source: WSJ) — Gold prices were slightly lower on the London spot market Wednesday, as a firmer dollar sapped demand for the precious metal.
Spot gold was down 0.2% at $1,073.60 a troy ounce in morning European trade, moving within a $7 range.
Gold prices received a short-lived boost on Tuesday, on news that Turkish military forces had shot down a Russian jet over Turkey’s border with Syria. The metal is often seen as a hedge against risk, as it maintains a stable level of value.
On Wednesday, gold traders turned back to the theme that has been dominating this metal since the summer—U.S. interest rate expectations and their effect on the dollar.
“A more pronounced price rise is being blocked by the growing expectation of a December rate hike by the US Federal Reserve,” Commerzbank AG said in a note.
The U.S. currency strengthened again on Wednesday, with the WSJ Dollar Index up 0.19% at 90.50.
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Fed funds futures, used by investors to place bets on central-bank policy, forecast a 74% likelihood of a rate increase from the Fed at its Dec. 15-16 policy meeting, according to data from CME Group. This is up from 50% a month ago.
A rise in rates would likely strengthen the dollar further, making gold more expensive to buy for those holding weaker currencies.
Looking ahead, cautious market participants are likely to remain focused on the Federal Reserve.
“With the FOMC [Federal Open Market Committee] meeting three weeks away, the market is likely to remain nervous and choppy,” said William Adams, head of research at Fastmarkets, in a note.
The other precious metals were divided midweek. Spot silver was up 0.1% at $14.166 an ounce, spot platinum was down 0.1% at $840.53 an ounce and spot palladium was up 0.6% at $543.49 an ounce.
Raj Shah has professional experience working for over a half a dozen years at financial firms such as Merrill Lynch and First Allied Securities Inc., ... <Read more about Raj Shah>