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Gold down on continued reaction to U.S. election

Xinhua, November 12, 2016 Adjust font size:

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Friday as the U.S. dollar continued to strengthen in the wake of the U.S. presidential election.

The most active gold contract for December delivery fell 42.1 U.S. dollars, or 3.32 percent, to settle at 1,224.30 dollars per ounce.

In a continued reaction to the U.S. election, investors believe that U.S. President-elect Donald Trump will cut income taxes and corporate taxes, leading them to believe that U.S. companies will enjoy further profits in years to come. This gave support to the U.S. dollar which in turn put pressure on gold.

The U.S. Dollar Index rose by 0.23 percent to 99.08 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.

The feature of the day was low volume as banks are closed, although the markets are open, and many investors are focused on the debate over who U.S. President-elect Donald Trump will appoint to be Treasury Secretary.

As the Treasury Secretary works closely with the U.S. central bank, many 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 at least 0.75 is at 81 percent at the December meeting and 72 percent for the February meeting.

Gold was put under further pressure as the U.S.-based University of Michigan showed its consumer sentiment index level increasing to 91.6, a figure which was not only better-than-expected, but analysts note it has reached a five-month high. This will likely put additional pressure on the precious metal, dampening its safe haven demand.

Silver for December delivery dropped 1.355 dollars, or 7.23 percent, to close at 17.382 dollars per ounce. Platinum for April delivery fell 39 dollars, or 3.97 percent, to close at 943.20 dollars per ounce. Endit