Gold Futures Settle Notably Lower As Dollar Rises On Strong Economic Data

Gold prices fell sharply on Monday as the dollar climbed higher after strong U.S. services sector data raised hopes of more aggressive rate hikes by the Federal Reserve.

The dollar index surged to 105.30 around noon, and was last seen hovering around 105.20, up more than 0.6% from the previous close.

Gold futures for February ended lower by $28.30 or about 1.6% at $1,781.30 an ounce.

Silver futures for March ended down $0.833 at $22.417 an ounce, while Copper futures for March settled at $3.7950 per pound, down $0.0555 from the previous close.

A report from the Institute for Supply Management showed U.S. service sector activity unexpectedly grew at an accelerated rate in the in the month of November.

The ISM said its services PMI climbed to 56.5 in November from 54.4 in October, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to dip to 53.1.

A separate report released by the Commerce Department showed new orders for U.S. manufactured goods jumped by more than expected in the month of October.

The report said factory orders shot up by 1% in October after rising by 0.3% in September. Economists had expected factory orders to increase by 0.7%.

“The risks that the Fed might need to do more remain elevated and that is why this economy needs to head to a recession,” said Edward Moya, senior market analyst at OANDA.

He added, “This next recession however won’t be rescued by quick Fed easing or a fiscal response as that will fuel inflation risks.”