Gold prices have fallen more than 8% during the past three weeks.
In October, the yellow metal rallied thanks to a weaker US dollar, but we already pointed out that the rally was likely to be short-lived as we expected the dollar to start rising. This is exactly what happened, the US dollar index recently made a seven-month high while gold prices fell sharply with the rest of commodities tied to the dollar (commodities are priced in US dollars and thus are negatively correlated to dollar fluctuations).
This month, investors now see a 70% chance of a Federal Reserve interest rate increase in December after the release of positive non-farm payroll numbers and the latest comments from the Fed.
The combination of higher rates and a surging dollar is particularly bearish for gold and other precious metals. Silver prices are following the same pattern:
What This Means For Metal Buyers
Both metals are near their summer lows. If the dollar stays strong (which we see as likely) these two metals could head back to five-year lows. Too early to call a bottom.