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Gold slides to nine-month low as dollar rallies on US data

Gold slides to nine-month low as dollar rallies on US data


Reuters
LONDON
Gold slid to a nine-month low on Wednesday as a buoyant dollar extended its rally on the back of strong US data that further cemented a case for increasing interest rates next month.
Spot gold dropped 1.5 percent to $1,193.91 an ounce by 1406 GMT, its weakest since Feb. 16. US gold futures fell 1.5 percent to $1,192.80.
US durable goods orders rebounded in October and jobless claims, though off a 43-year low, remained below a level consistent with a tightening labour market. The data sent the dollar index to a fresh 13-1/2 year high.
"The dollar rally has been taken to another level on the back of the US durable goods data, which was really stunning," said Naeem Aslam, chief market analyst at Think Markets UK. Gold has shed more than 10 percent from a peak hit in the aftermath of the US election two weeks ago, holding above key support around $1,200.
"It has been a pretty dreadful time for gold. Everything that's good for growth has been negative for gold," said Robin Bhar, head of metals research at Societe Generale in London. The metal has been hit by expectations that the policies of US president-elect Donald Trump will boost economic growth as well as strong US data supporting the case for a rate hike.
Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced. Traders are pricing in a 100 percent chance of a December rate increase, according to the CME Group's FedWatch Tool.
The US Federal Reserve next meets December 13-14.
Uncertainty surrounding Italy's constitutional referendum on December 4 and French and German elections next year, however, could support gold through safe-haven buying, Bhar said.
"Seasonally, as we move towards Christmas, New Year and Chinese New Year, that should see some physical support." While Trump's victory has spurred safe-haven buying of physical gold in Europe, traditional bullion holders in the United States are standing pat. Silver fell 2.3 percent to $16.25 an ounce, its lowest since June.
Platinum shed 1.7 percent to $920.99 and palladium dropped 1.2 percent to $731, pulling back from its highest since early June at $749.40 in the previous session.

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