The price of gold dropped to 1172.49 on Thursday, indicating a 0.43% decline (by $5.10). The gold volume was recorded at 143,002. Market experts report that the precious metal has never performed as badly as it did in the month of November since the year 2013. It is quite possible that the same trend will continue in the month of December as well. The recent interest rate hike announced by the Federal Reserve Bank of the United States has become a great factor of worry among investors. The possibility of a tighter monetary policy in 2017 is likely to boost the dollar and cut the demand for gold.
There was a tremendous drop in the commodity last month (more than 100 dollars per ounce). The gold price is also being affected by the dollar.
Another drop after slight hope
On Tuesday, markets announced a minimal rise in gold prices after they reached their lowest in the last ten months. However, Thursday took away the little hope that investors had started to build up regarding recovering gold prices. According to Jiang Shu, who works as the Shandong Gold Group chief analyst, gold is being supported to some extent by the jewelry makers in China as they get ready for an early spring festival in the coming year.
There was a rise in spot gold by 0.2 percent on Tuesday after it reached $1,157 an ounce a day earlier. This was its lowest since February 5th. The US gold futures also touched their ten-month low dropping by 0.2 percent to reach $1,173.90 per ounce. There has been a 141-ton drop in the total gold holdings in exchange-traded products and daily reductions have been recorded since early November.
Bullion’s response to the interest rate hike
Rising interest rates have a profound impact on Bullion (priced in dollars) and render the non-yielding asset much less attractive. On the other hand, the dollar gets a boost with a hike in the rate of interest.
In November, the services sector in the United States of America reached a one-year high. The increase in production led to improved hiring. This gives greater proof of the economy’s strength paving the path for the U.S. Federal Reserve Bank to increase interest rates in the near future.
As far as 2017 is concerned, most people would be shocked if the gold prices and the U.S. dollar end up rising together.