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Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading

By:
Barry Norman
Updated: Nov 30, 2015, 06:47 UTC

Gold prices took a big hit in the Asian session falling $13.80 in the Asian session. Gold remains weak at 1055.90 while silver gave up 13 points to trade

Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading

Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading
Strong Dollar, Rate Increase And Geopoltical Tensions Affecting Metal Trading
Gold prices took a big hit in the Asian session falling $13.80 in the Asian session. Gold remains weak at 1055.90 while silver gave up 13 points to trade below the $14 price level. Platinum fell $8.85 to 827.60. Gold’s monetary value fell to its lowest point in about six years. Due to what industry analysts say is a strengthening U.S. dollar, an expected rate hike from the Federal Reserve and an apparent Chinese stock market slump, the precious metal’s prices temporarily fell to a longtime low of $1,051 an ounce.

The commodity’s price closed at $1,055.90 Friday. The price indicates gold’s decline in popularity since reaching its highest price of $1,890 in 2011. The metal hit its lowest value in Feb. 2010 at $1,045 an ounce. The drop is suggested to have occurred due to a possible rate hike to be decided by the Federal Reserve in the coming weeks. In preparation, investors have decided to sell before they are affected. Reserve executives will meet starting Dec. 15 to discuss the decision.

Investors have been selling their gold holdings in recent weeks on anticipation that the Federal Reserve will raise interest rates for the first time since 2006. Fed officials in late October signaled that they would use their December 15-16 policy-setting meeting to review whether the US economy has recovered enough to warrant tighter monetary policy. Many investors expect gold to struggle once rates climb as it doesn’t pay interest and costs money to hold.

gold

The strength of the US dollar continues to weigh on global metals with copper trading at new lows last week. After the Chinese government announced that it would be restocking its strategic reserves metal prices recovered a bit only to reverse and begin to decline on Friday after stocks in China declined 5% on news of new investigations by regulators into irregularities in the country’s largest brokers. Copper dipped 15 points as the greenback continued to climb this morning. Traders are closely monitoring Chinese manufacturing PMI data due tomorrow.

Increasing tension between Russia and Turkey caused investors to purchase metals and other commodities to hedge against the geopolitical risk, the report said. However, the added demand won’t solve the ongoing oversupply problems in the copper market. Domestic refined copper production in October increased 0.6 percent year-on-year to about 690,000 tons, according to data from the National Bureau of Statistics in November.  China also approved about $100 billion worth of new infrastructure projects in late October and early November, Reuters said on Friday. Increasing tension between Russia and Turkey caused investors to purchase metals and other commodities to hedge against the geopolitical risk. However, the added demand won’t solve the ongoing oversupply problems in the copper market. Domestic refined copper production in October increased 0.6 percent year-on-year to about 690,000 tons, according to data from the National Bureau of Statistics in November. China also approved about $100 billion worth of new infrastructure projects in late October and early November, Reuters said on Friday. 

copper

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