Investing.com - Gold rallied more than $10 on Monday, amid skepticism over the Federal Reserve's ability to raise interest rates as much as it would like next year.
Gold for February delivery on the Comex division of the New York Mercantile Exchange tacked on $11.50, or 1.08%, to trade at $1,076.30 a troy ounce during U.S. morning hours. On Friday, gold jumped $15.40, or 1.47%.
The Fed raised interest rates for the first time since 2006 last week in a widely expected decision. Speaking at a press conference following the announcement, Fed Chair Janet Yellen vowed that the FOMC will not be mechanical in its approach to normalize monetary policy and that future rate hikes would be gradual and data dependent.
According to its latest median projections, the FOMC anticipates that the Fed Funds Rate will reach 1.375% by the end of 2016, implying four quarter-point hikes next year. However, the Fed funds futures currently suggests there will be just two rate hikes in 2016, one in June and one in December.
A gradual path to higher rates poses less of a threat to gold prices than a swift series of increases.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 98.55, off last week's two-week peak of 99.33. Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
The yellow metal is on track to post an annual decline of 10% in 2015, the third yearly loss in a row, as speculation over the timing of a Fed rate hike dominated market sentiment for most of the year. Rising interest rates historically have been bad news for gold, which can't compete with the higher interest rates offered by other assets.
Meanwhile, silver futures for March delivery rose 10.9 cents, or 0.77%, to trade at $14.20 a troy ounce. Silver prices sank to $13.62 on December 14, a level not seen since August 2009.
Elsewhere in metals trading, copper rose to a more than one-week high on Monday, amid speculation that Chinese metal producers will scale back production to combat falling prices.
Copper is on track to post an annual decline of 27% in 2015 as fears of a China-led global economic slowdown spooked traders and rattled sentiment.
The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.
Trading volumes are expected to remain light in the week ahead due to the Christmas holiday and as many traders already closed books before the end of the year, reducing liquidity in the market and increasing volatility.
The U.S. is to release key reports on gross domestic product, durable goods orders, home sales and jobless claims later this week, as traders look for further indications on the strength of the economy.