FX.co ★ Precious metals eases on stronger dollar

Last week the US saw a lot of important data. Most of the reports were favorable for the dollar. As a result, American currency rose, while the precious metals market suffered a lot.

During the past seven days, the dollar strengthened against its major counterparts by 0.7%. American retail sales data for last month gave the greenback the main impetus on Thursday for gains.

Retail sales increased 0.7% last month, and economists had forecast a 0.8% drop. A stable retail sector indicates higher consumer sentiment. That data is raising the prospect that the Fed during its September 21-22 meeting could aim to announce a tapering of its bond buying program.

Amid optimism about a more rapid unwinding of the stimulus measures, the dollar index rose 0.3% on Friday to a three-week high of 93.259.

The University of Michigan Consumer Sentiment Index provided additional support for the dollar. It rose to 71 in September from 70.3 in the prior month.

The positive dynamics of the greenback had a negative impact on the value of gold bullion. December gold declined by $5.30, or 0.3%, to settle at $1,751.40 an ounce, following a 2.1% or $38.10 decline on Thursday. Prices logged their lowest settlement since August 10.

Thus, gold futures fell for the third session in a row, which resulted in the asset ending last week in a decline, just like the previous one. Over the past seven days, the metal lost 2.3%.

"Gold had a bad week and its price action may be its way of front running an increasing likelihood that the reflation trade is coming back to finish off 2021," Michael Armbruster, managing partner at Altavest, told MarketWatch. "Unfortunately for gold bugs, gold tends to trade lower in a reflationary economic regime because Treasury yields tend to rise."

Other popular precious metals also fell over the past seven days. Silver fell 6.5% and palladium dropped 6.7%. At the same time, the price of copper was down 4.6% over the period. Platinum slipped 2.7%.

Investors' main focus this week is on the forthcoming US Federal Reserves' meeting. At the same time, many analysts are confident that there will be no significant changes on it. Overall, the Fed's tone will be hawkish as the regulator continues to prepare for the upcoming tapering of stimulus measures.

Brown Brothers Harriman analysts suggest that the Fed is likely to put on record about the tapering of asset purchases at a November 2-3 meeting, with the process starting in December or early 2022.

Experts believe that interest rates are not expected to rise earlier than 2023. However, all of these factors will contribute to the growth of the dollar.

Ahead of the September meeting, the US currency continues to strengthen in the hope of the Fed's hawkish rhetoric, which is one of the key headwinds for gold. The metal was still on a downward trajectory on Monday morning. The futures declined 0.2% to $1,748.60.

"Gold's price action is ominous, especially as dollar strength persists and US yields continue firming. The precious metal is likely to test the $1,720 level with longer-term support around $1,675," said OANDA analyst Jeffrey Halley.

Meanwhile, other metals are influenced by the dollar and other negative factors. Amid this situation, the week is off to a bad start for them.

Silver fell 0.8% to $22.22, while copper slide 1.7% to $4,174. Platinum slumped 2.5% to $917.58. Palladium slipped 3.2% to $1,952.69.