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Gold up on weaker U.S. dollar

Xinhua, September 7, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange rose on Tuesday as the U.S. dollar showed weakness.

The most active gold contract for December delivery rose 27.3 U.S. dollars, or 2.06 percent, to settle at 1,354 dollars per ounce.

Traders are weighing the prospect of an increase in the U.S. interest rate, which put pressure on the U.S. dollar. The U.S. Dollar Index fell by 0.98 percent to 94.84 as of 1900 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

Current expectations are that the Fed may raise rates from 0.50 to 0.75 during the December Federal Open Market Committee (FOMC) meeting.

According to the CME Group' s Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 18 percent at the September 2016 meeting, 23 percent at the November 2016 meeting, and 49 percent at the December meeting.

Part of the reason for the decrease in expectations on Tuesday for the U.S. Federal Reserve to decrease interest rates includes worse-than-expected performance by the Institute for Supply Management' s non-manufacturing index, which fell to 51.4 for the month of August.

This was much worse than expected, and the new orders sub-component fell to 51.4, the lowest reading of this measure since December 2013. Analysts believe that this report could potentially be an outlier, and that due to previous months of stronger-than-expected new orders, this report may be mitigated in coming months.

Traders are looking to the week ahead for the Fed' s Esther George to speak on Wednesday and the weekly jobless claims report due Thursday.

Silver for December delivery rose 77.2 cents, or 3.99 percent, to close at 20.138 dollars per ounce. Platinum for October delivery added 40.5 dollars, or 3.81 percent, to close at 1,102.7 dollars per ounce. Endit