Why Could Gold Prices Fall below $1,180 per Ounce?
This series analyzes gold prices and market fundamentals. For an in-depth look at gold and related companies, sectors, and drivers, please refer to our Gold ETFs page.
COMEX-traded gold futures contracts for June delivery gained marginally by 0.22% on May 25, 2015. They were trading at $1,207.60 per ounce. Prices gained marginally despite slowing demand and the appreciating dollar.
ETFs like the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) generally follow gold prices. Likewise, the Market Vectors Gold Miners ETF (GDX) reflect gold’s price movement most of the time.
Lower gold prices impact gold miners’ revenue like Kinross Gold (KGC), Yamana Gold (AUY), and B2Gold (BTG). These companies account for 10.35% of GDX.
China and India are the major buyers of physical gold. They represent 54% of global gold demand. The slowing demand from China and India might push gold prices lower. Demand in India would be lower because there aren’t any festivals in the next three months.
The better prospects of the rising interest rate in the US supported the US dollar. Market surveys suggest that the Federal Reserve might increase the interest rate by September 2015. The US Dollar Index appreciated against the major currencies and rose to 96.42 on Monday’s trade. The rising dollar makes dollar denominated gold expensive. This curbs the demand for gold. It put pressure on gold prices.
Gold prices increased for the sixth time in the last ten days. During the same period, gold prices rose by 0.27% more on the average up days than on the average down days. Gold had a mediocre performance in yesterday’s trade. Prices increased by 2.24% YTD (year-to-date)—led by increased demand from India.
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