The price of gold fell back near six-year lows on Friday and was headed for a sixth straight weekly decline, as the dollar firmed on the prospect of a US interest rate rise next month.
Gold for February delivery plunged more than $20 in intraday trade. The yellow metal would settle at $1,055.50 per troy ounce, declining $14.20 or 1.3% on the Comex division of the New York Mercantile Exchange. With Friday’s loss, gold prices are down more than $120 over the past four weeks.
Weaker gold prices also weighed on other precious metals. Silver futures fell 17 cents or 1.3% to $14.00 per troy ounce. Platinum spot plunged $14.99 or 1.8% to $837.54 per ounce.
Gold and other precious metals were under pressure after the US dollar spiked on Friday, as investors continued to price in a US rate adjustment next month. The dollar index, a weighted average of the greenback against a basket of currencies, climbed 0.3% to 100.13.
The Federal Reserve is widely expected to begin raising interest rates at its next meeting on December 15-16. Higher interest rates would raise the opportunity cost of holding non-yielding assets, such as gold. Since the yellow metal is priced in US dollars, it becomes more expensive for foreign investors when the American currency rises.
The dollar strengthened against the euro on Friday, with the EUR/USD falling 0.3% to 1.0579. That was the pair’s lowest level since March 17.
Unlike the Fed, the European Central Bank (ECB) is widely expected to ease monetary policy further at its next meeting on December 3.
Global stock markets traded largely to the downside on Friday. European stocks eased off three-month highs, with the pan-European STOXX 600 falling 0.1%. London’s FTSE 100 Index was also down 0.2% in intraday trade.
Share prices in Asia declined across the board. China’s Shanghai Composite Index plunged nearly 200 points or 5.5% after Chinese Brokerage Citic Securities announced it had received a formal notice from the China Securities Regulatory Commission (CSRC) that it was under investigation. The CSRC is reportedly investigating the firm’s short selling and speculative practices.
Hong Kong’s Hang Seng Index also took a beating, plunging more than 420 points or 1.9%.
A selloff in China also weighed on Japanese markets, with the Nikkei 225 Index closing down 0.3%.
American stock futures were trading mixed ahead of the open bell. The Dow Jones mini fell 24 points. The Nasdaq 100 mini edged up 9 points.
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.