Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as the U.S. Dollar showed strength. The most active gold contract for February delivery fell 8.2 U. S. dollars, or 0.77 percent, to settle at 1,059.80 dollars per ounce. The U.S. dollar index rose Wednesday, adding pressure to gold, analysts said.
The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
Oil also fell as the WTI Crude Oil Index fell by 1.16, or 3.06 percent, to 36.72 as of 19:30 GMT. Analysts said that the price of gold often follows oil as investors look to hedge their bets against oil-led inflation. About the economic data on Wednesday, the Pending Home Sales Index decreased 0.9 percent to 106.9 in November from an upwardly revised October reading, according to the National Association of Realtors.
The long-term trend for gold remains strongly bearish according to analysts as the Fed hiked its interest rate in December, which came despite expectations for a delay in the rate hike until 2016. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest.
Until the December FOMC meeting there had not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis. Silver for March delivery fell 8.6 cents, or 0.62 percent, to close at 13.842 dollars per ounce. Platinum for April delivery dropped 19.6 dollars or 2.20 percent, to close at 872.60 dollars per ounce.
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