Gold rates have plummeted to their biggest weekly fall of the last three months at the end of trading on Friday, 9th November. The market fell drastically after the dollar rose towards a 16 month high on Friday. The hike in the dollar was witnessed after the Federal Reserve stuck to the tighter monetary stance and decided to announce another rate hike by December this year.
Spot gold rates fell by 0.9 percent to reach $1,212.20 per ounce, having touched the monthly low at $1,211.32 earlier. U.S gold futures also fell by some 1 percent to reach the price of $1,212.9 per ounce.
Spot prices for gold are down by around 1.6 percent for the week, which is the biggest weekly fall ever, since the week ending August 17. Gold prices had solidified during October, but the results from the U.S elections and the Fed meeting have pushed the market back.
“It is pretty clearly a dollar-related move today, which has happened since the latest decision from the U.S. Fed,” believed capital economist and analyst Ross Strachan. “The sentiment in the market is quite cautious after recent spikes, consolidating in the $1,220 to low $1,230 levels and not breaking out of that,” Strachan added.
A firm performance in October saw spot gold touch a peak of $1,243.32 on October 26, which was the highest ever since the mid of July. The current decrease in value is expected to be influenced by a firm dollar.
The United States dollar firmed towards a massive 16 month peak during trading on Friday. The peak was underpinned by a rising interest rate and a robust U.S. economy. This peak made bullion more expensive for people holding other currencies. Rate increases also have additional pressure on gold prices, since they increase the opportunity cost for investors holding on to relatively non-yielding bullions.
“We remain cautious on gold here as roughly half the recent advance seems to have been rolled back in recent days on account of a stronger dollar and more resiliencies in U.S. equity markets,” wrote INTL FCStone analyst Edward Meir through a note.
“In addition, U.S. interest rates seem to be on the march again,” Meir added. “There is not much of an upside trigger that could lead to a sustainable rally.”
The Fed held its meeting on Thursday and indicated that it was on track to tighten borrowing costs after hiking interest rates three times this year. Additionally, another increase in the rates is expected by this December.