Gold prices drifted lower on Friday and recorded their biggest weekly fall in more than two months, as the U.S. dollar gained in strength on the back of the Federal Reserve’s statement on Thursday that it would continue to raise interest rates gradually.
The inflation data released today showed U.S. producer price index to have increased by a more than expected 0.6% in October, raising prospects of a rate hike in December. With more rate increases very likely in the coming year as well, the dollar has been moving higher against most major currencies, notwithstanding a few weak spells here and there.
The dollar index rose to 96.84 before retreating a bit, but at 96.75, was still trading firm with a gain of about 0.2% over previous close.
Gold futures for December ended down $16.50, or about 1.4%, at $1,208.60 an ounce, the lowest settlement price in about a month.
On Thursday, gold futures ended down $3.60, or 0.3%, at $1,225.10 an ounce. For the week, gold futures shed about 2%.
Silver futures for December ended down $0.283, at $14.140 an ounce. Silver lost over 3% in the week, its biggest weekly drop twelve weeks.
Copper futures for December settled at $2.6845 per pound, losing $0.0515 for the session.
On Thursday, the Federal Reserve left interest rate unchanged, citing realized and expected labor market conditions and inflation. The central bank reiterated that it expects further gradual increase in interest rates will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near its 2% objective over the medium term.
The Fed’s statement was largely unchanged, noting the labor market has continued to strengthen and economic activity has been rising at a strong rate since the previous month.
In economic news today, a report from the Labor Department showed a much bigger than expected increase in U.S. producer prices in the month of October. The report said producer price index for final demand climbed by 0.6% in the month, after rising by 0.2% in September. Economists had been expecting another 0.2%.
Excluding food and energy prices, core producer prices still rose by 0.5% in October after edging up by 0.2% in September. Core prices had been expected to rise by another 0.2%.