Gold price at four-week low



The gold price fell to a four-week low today, marking a near-$50 retreat from its highs earlier this month. The fall was set in motion at the end of last week in the wake of the Federal Reserve raising interest rates for the second time this year. Hints of a possible third rise in the coming months are also affecting trading.
While the Fed’s move was widely expected, it’s seen as being increasingly hawkish on rates – and higher rates hurt non-yielding assets like gold relative to income-bearing alternatives.
Bloomberg says that some hedge funds had anticipated the move. They traded net long positions (bets on prices being higher in the future) down by more than ten per cent ahead of the Fed’s Open Markets Committee meeting last week.
The precious metal was trading a little below $1,295 an ounce earlier this month and was on course to set a new 2017 high.
Today it’s still edging lower. At the time of writing, it’s changing hands at around $1,248 an ounce – its lowest level since 24 May, according to Reuters.
Alongside the rates focus – which also has the effect of boosting the dollar against which gold is negatively correlated – a confluence of geopolitical issues that was driving trader uncertainty appears to have dissipated.
When traders are nervous they tend to turn to gold, which is famously a safe haven at times of stress.
Issues that were a source of concern include the increasingly bellicose rhetoric between Donald Trump and North Korea, and the James Comey scandal that was seen as having the potential to bring down Trump’s administration.—Agencies