Gold futures on the COMEX division of the New York Mercantile Exchange rose on Monday as the U.S. dollar fell, despite traders' widespread belief that the U.S. Federal Reserve will raise interest rates this week.
The most active gold contract for February delivery rose 3.9 U.S. dollars, or 0.34 percent, to settle at 1,165.80 dollars per ounce.
Gold was given support as the U.S. Dollar Index, a measure of the dollar against a basket of major currencies, fell by 0.62 percent to 101.01 as of 1900 GMT. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
The market spent Monday focused on its belief that the Fed will raise rates from 0.50 to 0.75 during the December Federal Open Market Committee (FOMC) meeting. According to the CME Group' s Fedwatch tool, the current implied probability of a hike from 0.50 to at least 0.75 is at 95 percent at the December meeting and 95 percent for the February meeting.
Analysts believe that the past several months have shown enough progress both in inflationary measures and in employment measures for the U.S. central bank to justify the increasing of the key interest rate.
A stronger economy leads banks to become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation, which the U.S. Federal Reserve seeks to control.
Traders are looking to the rest of the week for the Federal Open Market Committee (FOMC) meeting beginning on Tuesday, producer price index, retail sales, industrial production, FOMC press conference on Wednesday, consumer price index, weekly jobless claims, and Philadelphia Fed business outlook survey on Thursday, and the housing starts report on Friday.
Silver for March delivery rose 22 cents, or 1.30 percent, to close at 17.187 dollars per ounce. Platinum for January delivery added 18.7 dollars, or 2.04 percent, to close at 933.70 dollars per ounce.
