(Chart courtesy of optionsHOUSE )
The Federal Reserve is turning hawkish, and gold futures are paying the price.
GCZ5 (Dec '15) gold contracts fell 10 points to 1107 yesterday, their sixth straight session in the red. The slide began on Oct. 28, when the Federal Reserve signaled it may raise interest rates on Dec. 16, and has now brought the metal back to the same area where it traded at the beginning of last month.
Every point in GC represents $100 in client accounts, so a trader who shorted before the meeting would have made about $7,000. That's almost twice the $4,125 initial margin required to open the bet.
Yesterday's drop was exacerbated by Fed Chair Janet Yellen saying in Congress that an interest-rate increase next month is a "live possibility." William Dudley of the New York branch agreed in separate comments.
Attention will continue to focus on interest rates this week, especially with the Labor Department's non-farm payrolls report tomorrow morning.
Gold has been trying to hold five-year lows since the summer as investors anticipate the Fed's first hike since mid-2006. Low inflation and a strong dollar have also weighed on sentiment.
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