Gold has fallen by more than a percentage point to a one-month low as the US dollar strengthened after the Federal Reserve reaffirmed its monetary tightening stance, seen as a negative for non-yielding bullion.
The Fed held interest rates steady last Thursday but is widely expected to raise them in December, for a fourth time this year, as it pointed to a healthy economy marred only by a dip in the growth of business investment.
Spot gold was down 1.3 per cent at $US1,207.78 per ounce, having touched its lowest since October 11 at $US1,206.13.
It was on track to end the week 2.0 per cent lower, the steepest weekly decline since the week of August 17.
US gold futures settled down $US16.5, or 1.35 per cent, at $US1,208.60.
‘The Fed’s announcement caused the dollar to strengthen and the outlook for higher U.S. interest rates has gold on the defence,’ said Bob Haberkorn, senior market strategist at RJO Futures.
Higher interest rates would be bullish for the dollar because non-U.S. investors would rather convert their local currencies to the greenback than buy gold, he said.
The dollar index of the greenback against six major currencies climbed, setting its sights on a 16-month high hit on October 31.
The outlook for tighter credit was supported by an unexpectedly big rise in US producer prices in October, at the fastest pace in six years.
‘This number is a huge surprise and if this trend continues, it should give the Fed ammunition for future rate hikes,’ Walter Pehowich, executive vice president of investment services at Dillon Gage Metals, said in a note.
Also weighing on overall commodity market sentiment was a decline in oil prices, with benchmark Brent crude falling to its lowest since early April.
‘Gold is re-establishing its relationship with the crude oil market,’ said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.
Gold can be used as a hedge against inflation fuelled by higher oil prices.
Investor sentiment in gold was reflected in holdings of SPDR Gold, the biggest gold exchange traded fund, which had an outflow of nearly four tonnes this week.
Silver fell about 1.7 per cent to $US14.16 per ounce, after touching its lowest since September 18.
The metal was headed for its worst week since February.
Platinum shed 1.3 per cent to $US853.30 an ounce, while palladium fell nearly 0.7 per cent to $US1,116.