Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

Austin— Gold gained 0.4% during the regular session, closing near $1,164, as soft U.S. economic reports pressured the dollar. The metal then plunged 1% to $1,147 in electronic trading after the Federal Reserve raised interest rates and signaled more hikes to come in 2017.

At the conclusion of its two-day meeting today, the FOMC raised interest rates by a quarter-point, as expected. It then followed the announcement with a slightly more hawkish statement than expected, saying "labor market conditions and inflation" warrant the committee's decision "to raise the target range" of future hikes. Policymaker forecasts indicate as many as three hikes next year.

The dollar shot higher after the statement, reversing earlier losses to gain 1% against major rivals. A stronger dollar pressures gold and other commodities denominated in it for international trade by making them more expensive to users of other currencies.

Some net-negative economic data pressured the dollar and boosted gold earlier in the day. Retail sales gained just 0.1% in October, and industrial production recorded its biggest drop in eight months, causing the Atlanta Fed cut its GDP forecast for Q4 to 2.4%.

Wholesale inflation gained 0.4% in November, however, supporting the Fed's rate decision. Bond markets are now pricing-in the highest long-term inflation in two years behind rising oil prices and the election of Donald Trump, whose promises to slash regulations and taxes while rebuilding infrastructure are seen as highly inflationary.

The other precious metals also finished higher before falling back after the Fed's statement. Silver rose 1.4% and then dropped to a net loss of nearly 0.8%. Platinum added 0.4% before sliding to a loss of nearly 1.5%. Palladium added 0.3% before netting a loss of 0.8%.

At the Comex close: February gold gained $4.70 to $1,163.70; March silver gained 24 cents to $17.22; January platinum picked up $4.10 to $940.80; and March palladium added $1.95 to $732.55 an ounce.