Gold price falls below $1,200/oz on dollar gain, oil fall

Otmane El Rhazi from The Bullion Desk.

The gold price slumped in late afternoon trade on Monday as oil plummeted and the dollar strengthened ahead of the Federal Reserve meeting that kicks off tomorrow.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last at $1,194.60 per ounce in after-hours electronic trade, which is $13.10 below Monday’s close and $30 below the session high.

Comex silver was hit ever harder – the grey metal was down five percent at $16.20 per ounce, which was a three-week low.

Gold’s renewed price volatility after the recent FOMC meeting in October suggests that bullion’s near-term direction may be dependent on the upcoming FOMC meeting and subsequent impact on monetary policy expectations, HSBC’s James Steel said in a report.

“A more dovish FOMC statement would in turn be price supportive while a hawkish statement would be negative, in our view,” Steel said. “The current macro environment has added headwinds to bullion given the weak euro, the dollar near a five and a half year high and crude oil near a five and a half year low. Gold is likely to remain weak in the near term, in our view.”

Meanwhile, in other commodities, light sweet crude (WTI) oil futures hit a new five year low at $55.02 per barrel, while the most-actively traded Comex copper contract settled at $2.8785 per pound, down 5.55 cents.

As for currencies, the dollar rose 0.21 percent against the euro while the dollar index was up 0.40 percent at 82.04.

Equity market also faced downward pressure with the Dow Jones industrial average and S&P 500 closed down 0.54 percent and 0.55 percent respectively, while Germany’s DAX and France’s CAC-40 ended down 2.72 percent and 2.25 percent.

In data, the Empire State manufacturing index was negative at -3.6 against the 12.1 forecast, while the NAHB housing market index was slightly under-par at 57, compared with a predicted 59.

In better news, November industrial production rose 1.3 percent – it had been expected up 0.8 percent. Capacity utilisation for the same month was 80.1 percent, better than the forecast 79.4 percent.

Later this week will see a slew of PMI numbers starting on Tuesday with China’s Flash HSBC reading, while attention will also be focused on this week’s US FOMC meeting for any indication on the timing of interest-rate rises after the end of quantitative easing.

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