Gold prices continued lower on Wednesday after plunging $15 in the previous session, as the markets braced for the first Federal Reserve interest rate hike in nearly a decade next month.
Gold for December delivery, the most actively traded contract, fell to a session low of $1,062.00 per ounce on Wednesday. It would settle down $1.30 at $1,067.30 per troy ounce, its lowest level on the Comex division of the New York Mercantile Exchange since February 2010.
The price of gold has plunged more than $100 since October 28 on the expectation that US interest rates will start to rise next month. Higher interest rates are expected to hurt non-yielding commodities such as gold and boost the US dollar, which typically trades inversely with the yellow metal.
The US dollar was little changed against a basket of currencies on Wednesday after rising in three of the past four sessions. The dollar index consolidated at 99.56, having appreciated nearly 5% over the past four weeks.
The outlook on gold remains overwhelmingly bearish, with more analysts forecasting a fall toward $1,000 an ounce. However, renowned financial analyst and stockbroker Peter Schiff doesn’t expect prices to fall further below current levels because the markets have already priced in a rate hike. This is evidenced by gold’s more than 20% drop since July 2014. By contrast, the US dollar has surged by around 24% over the same period.
Precious metals were down across the board on Wednesday. Silver futures fell 14 cents or 1% to $14.03 per troy ounce. The price of copper also fell $2.40 or 1.1% to $208.00 a pound. Platinum spot declined $6.95 or 0.8% to $847.15 per troy ounce.
In economic data news, US housing starts declined more than forecast in October, but a surge in building permits continued to point to a solid recovery in the nation’s housing market.
Groundbreaking for single-family homes fell 11% to a seasonally adjusted annual rate of 1.06 million units, the lowest level since March, the Commerce Department reported. Still, October starts remained above the 1 million mark for the seventh consecutive month, the longest stretch since 2007.
Building permits rose 4.1% to a seasonally adjusted annual rate of 1.15 million, government data also showed.
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.