Gold Plunges on Expectations that Rates May Rise Sooner than Expected

December Comex Gold futures traded sharply lower on Wednesday as bearish sellers took advantage of thin trading conditions and a firmer U.S. Dollar. The futures contract broke to $1328.10 before bouncing slightly to $1330.20, down $15.90 or -1.19%. The move also triggered technical stop loss orders under $1335.30, changing the trend to down. Also contributing to the weakness was lower crude oil prices.

The weakness may also be indicating that investors are turning bearish ahead of Fed Chair Janet Yellen’s speech on Friday. Some traders believe she is going to set a hawkish tone and side with a few high-ranking Fed officials who are supporting expectations that rates will rise sooner rather than later.

October Crude Oil prices sold-off on Wednesday on bearish news from the U.S. Energy Information Administration. Earlier today, the EIA said in its weekly report that U.S. crude stockpiles rose by 2.5 million barrels to a total of 523.6 million barrels in the week through August 19 as refinery inputs decreased and gasoline production fell. Analysts and traders had been looking for a 455,000-barrel drawdown.

The EIA report also said that U.S. crude oil imports averaged over 8.6 million barrels per day last week, up by 449,000 barrels per day from the previous week. Additionally, over the last four weeks, crude oil imports averaged 8.5 million barrels per day, 13.3 percent above the same-four week period last year.

In the products, gasoline stocks were up by 36,000 barrels, compared with expectations in a Reuters poll for a 1.2 million-barrel drop. Distillate stockpile, which include diesel and heating oil, rose by 122,000 barrels, versus expert estimates for a 400,000-barrel increase, the EIA also reported.

Nearby WTI crude last traded $46.88, down $1.22 or -2.54%.

Short-covering ahead of the Yellen speech and strong U.S. economic data helped drive the U.S. Dollar higher against the Euro. The EUR/USD traded down to 1.1245, before moving up slightly to 1.1251, down 0.0055 or -0.49%. The Euro traded lower despite a Euro Zone report that showed stable private business activity this month, easing concerns about negative spillover from Britain’s vote to leave the European Union.

The GBP/USD posted a small gain of 0.0046, up +0.35% at 1.3242. It was supported by the idea that the Bank of England may pass on an interest rate cut and further stimulus at its next meeting on September 15.