Gold prices sank Wednesday to their lowest settlement since early February, as the dollar jumped after largely upbeat economic data.

Prices for the metal made modest moves above and below the settlement level in electronic trading as minutes from the Federal Reserve’s November meeting pointed to an interest-rate increase “relatively soon.”

Gold futures for December delivery GCZ6, -0.33% was at $1,188 an ounce in electronic trading half an hour after the release of FOMC minutes. It had ended the regular trading session down $21.90, or 1.8%, at $1,189.30 an ounce, which marked the lowest close since early February, according to FactSet data.

According to the minutes of the bank’s last big meeting, which were released after gold futures settled, senior Fed officials agreed last month that it might be appropriate to raise interest rates “relatively soon” against a backdrop of an improving labor market and somewhat higher inflation.

Financial markets generally expect the central bank to raise rates during its next policy meeting in mid-December. They see a 93.5% chance the central bank will raise its benchmark short-term interest rate by a quarter-point to a range of 0.5% to 0.75%, according to a website that tracks investor expectations.

“Traders have pretty much priced in that another rate hike may take place next month,” said Naeem Aslam, chief market analyst at ThinkMarkets, before the FOMC minutes were released.

“The economy is strong and the data is telling you that clearly. The question is how much attention the Fed is going to pay in relation to their future path of interest rate hike. Under the current situation, we expect the Fed to remain very hawkish during the first quarter of 2017,” he added.

Higher rates are typically negative for non-yielding gold and positive for the dollar, which can cut demand for precious metals priced in the greenback.

“The positive stock market reaction to [President-elect Donald] Trump’s win, which is mainly due to the expectation of a large fiscal stimulus next year, has reinforced expectations of a rate hike next month,” said Paul Ashworth, chief U.S. economist at Capital Economics, in a note after the FOMC minutes. “Fed Chair Janet Yellen did nothing to dampen those expectations in her congressional testimony last week.”

On Wednesday, gold prices fell as upbeat U.S. economic data prompted the ICE U.S. Dollar Index DXY, 0.14% a measure of the dollar against six rivals, to extend early gains. It was up 0.6% at 101.65, trading at its highest in over a decade. U.S. stocks, meanwhile, were mixed after the major indexes secured record closes both Monday and Tuesday.

“Gold broke the $1,200 level which we have been drumming for the past few weeks,” said Aslam. “The next key levels of support are at $1,180 and $1,150 an ounce.”

“It was the U.S. durable-goods orders which brought the knockout blow for the metal” during Wednesday’s trading session, he said.

Orders for long-lasting goods made in the U.S. soared 4.8% in October largely because of stronger demand for commercial aircraft, but business investment is still not showing much spark. The increase in new orders for durable goods—the fourth in a row—topped the 3.3% estimate of economists surveyed by MarketWatch.

Also, the number of Americans who applied for first-time unemployment benefits in mid-November leapt by 18,000 to 251,000, but the increase comes just one week after initial claims fell to 43-year low in a reflection of a sharply improved labor market.

Rounding out metals action on Comex, December copper HGZ6, 2.45% rose 6.3 cents, or 2.5%, to $2.608 a pound, while December silver SIZ6, -0.13% fell 24.1 cents, or 1.5%, at $16.391 an ounce. January platinum PLF7, -0.88% fell $11.90, or 1.3%, to $931.10 an ounce.

December palladium PAZ6, -0.05% shed $6.85, or 0.9%, to $737.40 an ounce, paring its recent climb. It’s been among the standout metals, driven higher on industrial demand bets. Palladium sees heavy industrial use as a key component in auto exhaust filters for gasoline-powered U.S. and Chinese cars.

Among exchange-traded funds, the SPDR Gold Trust GLD, -1.98% declined 1.8%, while the iShares Silver Trust SLV, -1.77% fell 1.6%. The VanEck Vectors Gold Miners ETF GDX, -4.92% dropped 5.1%.



Source: MarketWatch