Gold Prices Drop Again: Led by the Strong Dollar
Slowing Demand Puts More Pressure on Gold Prices (Part 1 of 2)
Gold prices drop
Below is our gold price and fundamental analysis. For an in-depth fundamental look at crude oil and related companies, sectors, and drivers, please refer to our Gold ETFs page.
June gold futures trading in COMEX declined marginally by 0.68% and settled at $1,182.20 per ounce on May 7, 2015. The price decline was led by the appreciating US dollar and subdued demand. Gold ETFs like the iShares Gold Trust (IAU) and the SPDR Gold Trust ETF (GLD) also fell in the direction of gold prices. In contrast, the Market Vectors Gold Miners ETF (GDX) gained in yesterday’s trade.
Lower gold prices impact gold mining stocks like Royal Gold (RGLD), Agnico Eagle (AEM), and Primero Mining (PPP). These stocks account for 11% of GDX.
The US Dollar Index appreciated against the major currencies and increased by 0.06% on May 7, 2015. The consensus of strong labor data boosted the US dollar against the basket of currencies. The U.S. Department of Labor will release the non-farm payrolls report on Friday. Strong labor data mean more confidence for the Federal Reserve to increase the interest rate in the near term. The appreciating dollar makes dollar-denominated gold expensive. As a result, gold prices decline.
The biggest gold buyers—like China and India—are showing subdued demand for gold, according to UBS sources. The demand from China is slowing in 2Q15, while the demand from India is concentrated in 3Q15.
This is the seventh down day for gold over the last ten trading sessions. Gold prices increased by 0.40% more on the average up days than on the down days, over the same period. Lead was the worst performer in yesterday’s trade. June gold futures had mediocre performances across all of the other commodities on Thursday’s trade.
Gold declined marginally by 0.08% YTD (year-to-date)—led by the strong dollar and slowing global gold demand. Prices continue to follow the long-term downtrend.
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