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Gold down 1% as dollar rises after Fed rate hike

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Investing.com -

Investing.com - Gold fell sharply in Europe on Thursday, as the U.S. dollar surged after the Federal Reserve raised interest rates for the first time in nearly a decade.

Gold for February delivery on the Comex division of the New York Mercantile Exchange slumped $11.00, or 1.02%, to trade at $1,065.80 a troy ounce during European morning hours. A day earlier, gold jumped $15.20, or 1.43%, boosted by short-covering ahead of the Fed meeting.

The Fed hiked interest rates by 25 basis points to a range between 0.25% and 0.5% in a widely expected move following the conclusion of its policy meeting on Wednesday.

Commenting on the decision, Fed Chair Janet Yellen said that further rate hikes would be gradual and data dependent.

The dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.35% to 98.75. A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

The yellow metal is on track to post an annual decline of 10% in 2015, the third yearly loss in a row, as speculation over the timing of a Fed rate hike dominated market sentiment for most of the year.

Rising interest rates historically have been bad news for gold, which can't compete with the higher interest rates offered by other assets.

Meanwhile, silver futures for March delivery shed 15.5 cents, or 1.09%, to trade at $14.01 a troy ounce. Prices slumped to $13.62 earlier this week, a level not seen since August 2009.

Elsewhere in metals trading, copper fell to a two-week low on Thursday, after the Federal Reserve's first rate hike in almost a decade pushed up the dollar, dampening demand for raw materials.

The U.S. is to release a weekly report on initial jobless claims at 8:30AM Eastern Time Thursday, as well as data on the Philadelphia Fed manufacturing index for December, as traders look for further indications on the strength of the economy.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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