Gold posted its
biggest loss since March after the Federal Reserve’s first interest-rate
increase in almost a decade strengthened the dollar, curbing the appeal
of owning precious metals.
The U.S. central bank
on Wednesday unanimously voted to raise borrowing costs by a quarter of a
percentage point. Higher rates reduce the attractiveness of holding
bullion, which doesn’t pay interest or give returns like assets such as
bonds or equities.
Gold slumped to a
five-year low earlier this month as traders bet that policy makers would
raise rates at the latest meeting. The decision was the culmination of a
yearlong effort to prepare investors and consumers for the end of an
unprecedented era of easy money. Fed Chair Janet Yellen said further
tightening would be slow.
Gold futures for
February delivery dropped 2.5 percent to settle at $1,049.60 an ounce at
1:42 p.m. on the Comex in New York, the biggest decline since March 6.
The metal is headed for a third straight annual decline.
Bullion typically
moves inversely to the dollar, which rose 0.8 percent against a basket
of 10 major currencies. Fed policy makers forecast that the short-term
rate will rise to 1.375 percent at the end of 2016, implying four
quarter-point increases in the target range next year, based on the
median number from 17 officials.
Source : Bloomberg
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