Gold falls in anticipation of interest rate hike

Alicia Cross
December 14, 2017

Gold was slightly higher on Tuesday, just up from its lowest in almost five months in the previous session, and ahead of the start of a two-day U.S. Federal Reserve meeting.

The Federal Reserve is widely expected to raise the fed funds target range by a quarter point at the conclusion of its two-day policy meeting at 2:00PM ET (1900GMT) on Wednesday, which would put it in a range between. They also tend to boost the dollar, making gold more expensive for holders of other currencies.

United States gold futures were up 0.3 per cent at $1,245.40. The WSJ Dollar Index, which tracks the US currency against a basket of 16 others, was up 0.1% Tuesday, paring earlier losses after data was released showing a gauge of USA business prices rose in November, pointing to emerging inflation pressure in the economy.

Spot gold was up 0.25 per cent at United States dollars 1,250.93 an ounce at early trade.

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Much will depend on the projections, said Think Markets analyst Naeem Aslam. "I would expect gold to remain offered on any rally retest its overnight lows around $1,240", said Jeffrey Halley, a senior market analyst with OANDA.

Republican plans to enact tax cuts that would stimulate the economy meanwhile looked harder to achieve after a Democrat won a U.S. Senate seat in Alabama on Tuesday, reducing the small Republican majority.

Spot gold may bounce to a resistance at $1,250 an ounce before falling again, as it has stabilised around a support at $1,239, Reuters technicals analyst Wang Tao said.

Among other precious metals, silver dropped 0.3 percent at $15.66 an ounce. Platinum for January fell 17.10 dollars, or 1.92 percent, to close at 875.70 dollars per ounce. Palladium was unchanged at $1,010 per ounce.

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