Gold Prices Drop to New Nine-Month Low as Strong Data Lifts Dollar

Gold prices plunged on Wednesday, reaching their lowest level since early February after upbeat economic data stoked a fresh rally in the US dollar.

February gold futures declined $16.00, or 1.3%, to $1,174.80 a troy ounce. That was the lowest settlement since February 5.

The rout in precious metals also extended to silver futures, which fell 18 cents, or 1.1%, to $16.56 a troy ounce.

After a largely uneventful week, the US dollar was back near 14-year highs on Wednesday as investors cheered on stronger than expected jobs and personal income data. The US dollar index, which tracks the greenback against a basket of other major currencies, climbed 0.7% to 101.61. The index briefly traded at 101.83, which would have marked new highs in the post-election rally.

Payrolls processor ADP reported Wednesday that US private sector employers added 216,000 workers in November, much higher than the 165,000 that was expected. The gains were concentrated in the service-providing industries, with transportation, and professional services shouldering most of the gains.

The Labor Department will release official nonfarm payrolls data on Friday. The report is expected to show the addition of 170,000 workers to payrolls in November. The unemployment rate is forecast to hold at 4.9%.

A separate batch of government data on Wednesday showed US personal incomes rose faster than expected in October, while personal spending lagged behind estimates. Personal incomes from all sources rose 0.6%, following a revised 0.4% increase in September. Personal spending climbed 0.3% in October, following an upwardly revised 0.7% increase the previous month.

The personal income and outlays report also pointed to stronger inflationary pressures, with core personal consumption expenditures (PCE) climbing 1.4% year-over-year. Core PCE is the Federal Reserve’s preferred measure of inflation.

For traders, Wednesday’s data added further confirmation the US central bank will raise interest rates next month. Federal Funds futures prices, which have long been used to express the market’s views on monetary policy, imply a nearly 100% likelihood of a December rate hike. Higher interest rates make the US dollar more attractive, thus lowering the opportunity cost of non-yielding assets, such as gold.

Comex Gold Futures (February 2017)

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About the author

Sam Bourgi

Sam Bourgi is a financial market analyst for economiccalendar.com. He has more than six years of progressive experience in economic and financial analysis, research consulting and sectoral analysis. As a published author in government, peer-reviewed, online and industry sources, he has developed a fundamental approach to the financial markets with a broad focus on stock indices, commodities and the technology sector. He earned his Bachelor’s Degree from the University of Windsor and Master’s degree from McMaster University.

Indices

NamePrice($)CommentChange($)Change %
S&P 5002,192+0.87+0.04%
NASDAQ5,256+4.55+0.09%
NYSE10,839+9.59+0.09%
FTSE 1006,730.72-22.21-0.33%
DAX10,513.35-20.70-0.20%
CAC 404,528.82-31.79-0.70%
EURONEXT 100872.00-5.61-0.64%
Nikkei 22518,426.08-87.04-0.47%
HANG SENG INDEX22,564.82-313.41-1.37%

Commodities

NamePrice($)Change($)Change %Comment
Light Sweet Crude Oil Futures,D47.48-0.01-0.02%
Gold Dec 161,175.70+8.80+0.75%
Silver Dec 1616.75+0.32+1.94%
Copper Dec 162.62-0.01-0.36%