Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold fell another 1.2% to close at $1,253, dropping beneath its 200-day moving average for the first time since February, as the dollar rallied further on rising expectations for a December rate hike from the Fed.

The buck extended its gains to a fourth session, gaining 0.5% against major rivals to reach a two-month high as traders bet that tomorrow's nonfarm payrolls report will support the Fed's case to raise interest rates this year. CME Fedwatch puts the odds at 64%, up from under 60% yesterday. A stronger dollar weighs on gold and other commodities denominated in it for international trade by making them more expensive in other currencies.

Yesterday's release of ISM data showing the U.S. services sector surging to an 11-month high in September added fuel to the dollar's rally, as did a speech by Richmond Federal Reserve President Jeffrey Lacker advocating raising rates pre-preemptively, before inflation begins to climb. Persistently low inflation has been a key impediment to normalizing monetary policy.

Gold's losses were augmented by additional technical selling in the wake of Tuesday's dramatic 3.3% plunge. Renowned investment analyst Dennis Gartman reported that the sell-off was likely triggered by "a forced liquidation on the part of a large� actually a massive� hedge fund out of London." The action of this entity launched a cascade of stop-loss sales among other leveraged speculators, spinning prices into freefall.

Many analysts see gold's tumble as temporary, however, with its depth and technical nature creating a "strong buying opportunity" going into next year, according to Markewatch.

The other metals also fell, with silver dropping 2% while platinum and palladium lost 1.1% and 1.4%, respectively.

At the Comex close: December gold fell $15.60 to $1,253; December silver slid 35 cents to $17.35; January platinum dropped $10.30 to $966.30; and December palladium gave up $9.45, to $666.15 an ounce.