Dollar Strengthens as Gold Dips: Dec 23 2015

On Wednesday the price of gold lowered. The price of the U.S. dollar grew and put pressure on the gold markets.

Gold for February delivery, the most actively traded contract, closed down 0.5% at $1,068.30 a troy ounce on the Comex division of the New York Mercantile Exchange.

The Wall Street Journal Dollar Index, which gauges the dollar against a basket of 16 currencies, traded as high as 90.12 earlier in the session. The index pared gains after regular trading ended in gold, and was recently unchanged at 89.95.

A stronger dollar tends to pressure gold, which is priced in the U.S. currency and becomes more expensive to foreign buyers when the dollar appreciates. The dollar received a boost last week, after the Federal Reserve raised interest rates for the first time in nearly a decade.

Looking ahead, a healthier global economy and tighter U.S. monetary policy is likely to keep gold prices under pressure, analysts said.

“We expect the global economic recovery to continue, with the U.S. set to lead the pace, thereby further undermining gold’s safe-haven appeal,” said Robin Bhar, head of metals research at Société Générale SA in a note.

Additionally, U.S. headline inflation isn’t expected to rebound quickly and the world’s biggest economy is expected to maintain a steady pace of further rate increases into 2016.

This “should see the U.S. dollar strengthen over the medium term, putting pressure on dollar-denominated prices,” said Mr. Bhar.