Gold Slips as First Fed Rate Increase Since ’06 Bolsters Dollar – by Eddie Van Der Walt and Ranjeetha Pakiam (Bloomberg News – December 17, 2015)

Gold dropped after the Federal Reserve’s first interest-rate increase in almost a decade strengthened the dollar, curbing the appeal of owning precious metals.

The U.S. central bank on Wednesday unanimously voted to raise borrowing costs by a quarter of a percentage point. Higher rates reduce the attractiveness of holding bullion, which doesn’t pay interest or give returns like assets such as bonds or equities.

Gold slumped to a five-year low earlier this month as traders bet that policy makers would raise rates at the latest meeting. Yesterday’s decision was the culmination of a year-long effort to prepare investors and consumers for the end of an unprecedented era of ultra-easy money. Fed Chair Janet Yellen emphasized further tightening would be slow.

“The Fed’s move was mostly in the price,” Georgette Boele, an Amsterdam-based analyst at ABN Amro Bank NV, said by e-mail. “Prices will still go lower, but in the near term, moves may be limited.”

Gold Price

Gold for immediate delivery lost 0.5 percent to $1,066.59 an ounce by 10:43 a.m. in London, according to Bloomberg generic pricing. The metal, down almost 10 percent this year, is headed for a third straight annual decline.

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