By CountingPips

Gold - Options TradingGold prices fell to their lowest in nine months on Sept. 30, as the U.S. dollar reached a high value against other currencies, and market participants speculated on when the Federal Reserve will increase its benchmark interest rates.

December gold dropped to $1,204.30 per ounce in early trading on the Comex division of the New York Mercantile Exchange, the lowest value for this contract since Jan. 2, according to Bloomberg News. It then recovered to reach $1,206.60 an ounce by 7:39 a.m.

Dollar Enjoys Gains

The contracts for the raw material fell to these levels as the Bloomberg Dollar Spot Index hit a four-year high, Kitco News reported. The greenback rose to its greatest price in 22 months relative to the euro and its most in six years versus the yen.

The dollar has experienced consistent gains so far this month, as some market participants believe the Federal Reserve will take further steps to reign in its monetary easing, while other central banks will go in the opposite direction, according to the media outlet.

Fed Speculation

The Fed has almost finished tapering its quantitative easing, and is scheduled to do so in October. Amid this change, many market participants have shifted their focus to when the central bank will begin increasing its borrowing costs in order to bring monetary policy back to a more normal state.

The U.S. has provided various reports in recent months that showed strength in the nation’s economy, including one from the Commerce Department, which indicated that the country’s gross domestic product expanded at a rate of 4.6 percent in the second quarter, higher than the previous estimate of 4.2 percent.

US Labor Market Improvement

In addition, the Labor Department has indicated that American employers have created more than 200,000 net positions per month for the last six months in a row. The unemployment rate has gradually ticked lower during this period. The strength of the labor market is a key indicator, and Janet Yellen, chair of the Fed, has emphasized its importance in her previous communications.

If the U.S. jobs market keeps improving, it will make it easier for the Fed to keep reducing monetary stimulus. In turn, if other nations flounder, their central banks will be hard-pressed to keep using policy to jumpstart economic conditions.

Zhu Runyu, an analyst at CITICS Futures Co., commented on these developments in a recent email, according to Bloomberg News.

“The divergence in monetary policies between the Fed and other central banks will further push up the dollar and weigh on gold,” Runyu said, the media outlet reported. “As geopolitical tensions fade, gold has also lost a key price support this year.”

The precious metal has already plunged 6.3 percent in September, the largest amount since June 2013, according to the news source. While gold enjoyed some appreciation earlier this year amid turmoil in the Middle East and Ukraine, losing another 0.4 percent will eliminate these gains.

Gold and Technical Analysis

From the perspective of technical analysis, gold is up against some factors that could easily cause it to move lower, Kitco News reported. Not only is Sept. 30 the final day of the month, but also the last day of the quarter. Where the precious metal closes at the end of the session could have a significant impact on where it goes in the coming weeks and months.

Gold bears have the technical advantage in the short-term, as the precious metal has reached a nine-month low and is in an 11-week-old downward trend, according to the news source.

Investors who want to trade gold might do well to learn about the technicals surrounding the precious metal. In addition, being familiar with the recent trends in both the U.S. dollar and the nation’s interest rates could bolster their decision-making.

Gary Beal