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Gold down ahead of Fed meeting

Xinhua, October 27, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday ahead of the November U.S. central bank meeting.

The most active gold contract for December delivery fell 7 U.S. dollars, or 0.55 percent, to settle at 1,266.60 dollars per ounce.

Gold was put under pressure as investors are in the process of reconfiguring their trading positions in order to mitigate risk ahead of the November Federal Open Market Committee (FOMC) meeting. Generally the period around a FOMC meeting is highly volatile and traders want to avoid the possibility of being caught off-guard.

Despite their preparations, investors believe the Fed may raise rates from 0.50 to 0.75 during the December 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 9 percent for the November 2016 meeting, and 74 percent at the December meeting.

The precious metal was prevented from falling further as the U.S. Dollar Index fell by 0.12 percent to 98.61 as of 1745 GMT, however analysts note that this was not outweighed by the Fed-induced rebalancing.

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.

A report released by the U.S. Department of Commerce on Wednesday showed new home sales within expectations at 593,000 during the month of September.

Analysts note that this report may have added further pressure to the precious metal as prices have increased by 6.7 percent.

Traders are also waiting for the durable goods orders and weekly jobless claims report due on Thursday, and the gross domestic product report due on Friday.

Silver for December delivery fell 15.4 cents, or 0.87 percent, to close at 17.626 dollars per ounce. Platinum for January delivery dropped 0.9 dollars, or 0.09 percent, to close at 964.00 dollars per ounce. Enditem