The Appreciating Dollar Could Pressure Short-Term Gold Prices
Gold prices fall
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.
June gold futures trading on the COMEX slightly declined by 0.02% on May 22, 2015, and settled at $1,204.90 per ounce. Prices declined as US inflation increased and the US dollar appreciated.
Gold-tracking ETFs like the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) marginally decreased on Friday, May 22, 2015. Likewise, the Market Vectors Gold Miners ETF (GDX) mirrored gold price movement and fell by 0.45% on Friday’s trade.
Declining gold prices also affect gold producers like Anglo Ashanti Gold (AU), Yamana Gold (AUY), and Goldcorp (GG). They account for 17.58% of the GDX ETF.
US inflation increased for the third month in a row in April 2015. The US Labor department reported that inflation increased by 0.1% in April’ 2015 from the previous month. The rise in inflation supported the US dollar and signaled better prospects for increasing the interest rate by the Federal Reserve. Surveys indicate that the Federal Reserve might increase the interest rate by September 2015.
The US dollar index appreciated against the basket of currencies and increased by 0.92%. It closed at 96.14 on Friday’s trade. The appreciation of the US dollar makes gold expensive. This curbs demand for gold and gold prices drop.
This is the fifth time that gold prices declined in the last ten trading sessions. Prices increased by 0.26% more on the average up days’ than on the average down days over the same period. Gold had an average performance across all commodities in yesterday’s trade. Prices rose by 2.22% year-to-date—led by improved demand from India.
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