The gold price has dropped to a seven week low of £834 per ounce on expectation that the Federal Reserve will raise interests in June. The price is now down £48 per ounce following the release of Fed minutes last week.
Gold is a direct competitor to the U.S. dollar and a rate rise makes holding dollars more attractive than the yellow metal which yields no interest. Despite the recent pull back institutional money such as hedge funds are still bullish on the yellow metal.
Prior to last week’s announcement the U.S. dollar was under pressure and the technical outlook for the greenback had been deteriorating. If nothing else this was a timely intervention from the Fed.
Holdings in the world’s largest gold exchange traded fund fell for the first time in a month yesterday to 868.66 metric tonnes.
Despite the recent pull back gold is still one of the best performing asset classes in 2016 and lower prices no doubt will bring in new buys.