The US dollar pushed higher on Monday, driving gold prices back toward six-year lows as investors continued to price in a rate hike from the US Fed in December.
The dollar surged to new seven-month highs on Monday, climbing against a basket of currencies. The dollar index, a weighted average of the greenback against six rivals, surged to a daily high of 99.98. It would later settle at 99.83, advancing 0.3%.
The dollar notched up gains against the euro, yen, pound and franc. The EUR/USD exchange rate fell to a daily low of 1.0599 on speculation that the European Central Bank (ECB) is planning to expand its stimulus program next month. ECB President Mario Draghi gave strong indication last Friday that the central bank was prepared to act very soon to boost stubbornly weak inflation.
The EUR/USD would consolidate at 1.0640 ahead of the New York session.
Heavy price action in the currency markets is expected to continue for the rest of the week amid a steady stream of economic data, including revised GDP figures from the United States, Germany and Britain.
A strong dollar and expectations for higher US interest rates pushed gold prices back toward six-year lows on Monday. Gold for February delivery, the most actively traded contract, fell $8.40 or 0.8% to $1,067.90 per troy ounce on the Comex division of the New York Mercantile Exchange.
With Monday’s decline, February gold is down around $110 since October 28.
Weak gold prices weighed on other precious metals on Monday. Silver for March delivery fell 19 cents or 1.4% to $13.94 per troy ounce. Copper and platinum spot prices also fell at the start of the week.
Global stock markets traded mixed on Monday. In China, the Shanghai Composite Index and Shanghai Shenzhen CSI 300 Index each declined 0.6%. The Hong Kong Hang Seng Index also fell 0.4%.
Tokyo’s Nikkei 225 Index notched up minor gains, closing up 0.1%.
European stocks were down across the board, as Brussels remained on lockdown for a third consecutive day amid concerns of a Paris-style terror attack. As of Monday, Belgian authorities had detained 16 people in connection with an investigation into the Paris attacks earlier this month.
London’s FTSE 100 Index was down 0.4% on Monday. Germany’s DAX Index traded 0.2% lower. The pan-European STOXX 600 was down 0.5%.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.