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Gold, Silver Plunge on Soaring Dollar, Lower-Than-Expect Producer Prices

Summary:
Gold futures are cratering to finish the trading week, driven by an accelerating rally in the US dollar. The precious metal’s plunge was exacerbated by producer prices rising less than expected. But gold prices may have limited their losses after the Federal Reserve revealed that it would not be exiting from its accommodative monetary policy strategy anytime soon. February gold futures plummeted .60, or 1.27%, to ,827.80 per ounce at 15:39 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a weekly drop of about 1.4%, adding to its early 2021 slide of 4%. Silver, the sister commodity to gold, fell below on Friday. March silver futures crashed %excerpt%.952, or 3.69%, to .85 an ounce. The white metal will post a weekly loss of 2.5%, bringing

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Gold futures are cratering to finish the trading week, driven by an accelerating rally in the US dollar. The precious metal’s plunge was exacerbated by producer prices rising less than expected. But gold prices may have limited their losses after the Federal Reserve revealed that it would not be exiting from its accommodative monetary policy strategy anytime soon.

February gold futures plummeted $23.60, or 1.27%, to $1,827.80 per ounce at 15:39 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a weekly drop of about 1.4%, adding to its early 2021 slide of 4%.

Silver, the sister commodity to gold, fell below $25 on Friday. March silver futures crashed $0.952, or 3.69%, to $24.85 an ounce. The white metal will post a weekly loss of 2.5%, bringing its year-to-date decline to more than 6%.

A strengthening greenback weighed on the metals market to close out the trading week. The US Dollar Index (DXY), which gauges the buck against a basket of currencies, advanced 0.46% to 90.66, from an opening of 90.22. A strong greenback is bad for dollar-pegged commodities because it makes it more expensive for foreign investors to purchase.

US financial markets poured through the injection of economic data. The producer price index (PPI) rose 0.3% in December, short of the market estimate of 0.4%. The core PPI edged up 0.1%, which was also below the forecast of 0.2%.

Industrial production climbed 1.6%, manufacturing output expanded 0.9%, business inventories rose 0.5%, and capacity utilization jumped to 74.5%.

Gold markets were disappointed by President-Elect Joe Biden‘s stimulus announcement on Thursday night. Investors had penciled in more than the $1.9 trillion stimulus that Biden laid out, which includes $1,400 direct income support payments, an extra $400 in unemployment benefits until September, and billions more for COVID-19 vaccines. The incoming president also intends to announce a second spending package that will address his long-term spending goals, like fighting climate change and reducing student loan debt.

Meanwhile, Fed Chair Jerome Powell revealed that the US central bank would not be tapering its ultra-aggressive quantitative easing program anytime soon, adding that markets should not be expecting interest rate hikes.

That wouldn’t be a reason to raise interest rates, unless we start to see inflation or other imbalances that would threaten the achievement of our mandate,

If inflation were to move up in ways that are unwelcome, we have the tools for that, and we will use them. No one should doubt that.

The US bond market was mostly in the red, with the benchmark 10-year Treasury yield slipping 0.039% to 1.09%. The one-year note inched 0.002% higher to 0.101%, while the 30-year bond shed 0.036% to 1.838%.

In other metal markets, March copper futures fell $0.053, or 1.45%, to $3.6115 per pound. March platinum futures plummeted $36.40, or 3.23%, to $1,090.00 an ounce. March palladium futures declined $21.80, or 0.9%, to $2,401.50 per ounce.

If you have any questions and comments on commodities today, use the form below to reply.


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Andrew Moran
I am a full-time professional writer. Prior to my self-employment, I worked as a reporter for Digital Journal covering the politics beat and The Toronto Times reporting on the city’s entertainment scene. I currently write mostly about business, marketing and finance

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