Gold down in biggest decline since 2013 on U.S. dollar strength

Gold futures on the COMEX division of the New York Mercantile Exchange fell sharply on Tuesday as the U.S. dollar strengthened significantly in the wake of the Brexit.

The most active gold contract for December delivery fell 43 U.S. dollars, or 3.28 percent, to settle at 1,269.7 dollars per ounce.

As the United Kingdom's British pound (GBP) hits a 31-year low in the wake of the Brexit, the U.S. dollar has strengthened sharply, with the U.S. Dollar Index rose by 0.4 percent to 96.13 as of 1845 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.

Analysts note that the market chaos caused by the GBP's fall would normally be supportive to gold; however, U.S. economic data continues to improve, and the U.S. Federal Reserve has kept the prospect of a 2016 rate hike on the table.

This has led investors to flock to the U.S. dollar as a safe haven, as it only increases in value relative to the GBP, as a combination of the looming rate hike and the GBP collapse has dampened appetite for gold as it is a non-interest bearing asset.

The precious metal was put under further pressure as Richmond Federal Reserve President Jeffrey Lacker told investors that he believes that the U.S. central bank should raise interest rates preemptively, as it had done in 1994. He noted that the preemptive action was successful and laid the foundation for price stability for the following decades.

Silver for December delivery dropped 1.093 dollars, or 5.80 percent, to close at 17.775 dollars per ounce. Platinum for 2017 January delivery fell 18.6 dollars, or 1.84 percent, to close at 990.5 dollars per ounce. Endit