When you become experienced through online trading, you get to realize that gold is a safe haven asset. The price of gold therefore influences, and is influenced by various important market factors.
Gold Falls to Lowest Point in Three-and-a-half Months
Gold has now fallen to its lowest in three-and-a-half months, with each ounce valued at below $1200. This follows the appreciation of the dollar against the yen to its highest level since April. While the gold prices fell to $1199 during trading hours in Asia, they rose to $1202 per ounce and then were down by around 1% on Monday, May 30. The dollar though crossed 111.0 yen, its highest level since April-end. This surge in the dollar comes after the US Federal Reserve expressed its readiness to again raise interest rates in the light of the US economy rising up and generating greater employment opportunities.
Interest Rate to Be Raised
At the Federal Reserve’s April meeting, there was unanimous support among its members to raise the interest rate again. Gold prices have since been under pressure. Any interest rate hike would raise the opportunity cost in terms of holding gold that does not bear interest. The uptick in the economy indicates a 30% probability of the interest rate being hiked in June. Hedge funds have cut down on their gold exposure, with the net long gold futures position coming down to 169,491 contracts, a decline of 26%, for the week ending May 24.
The US data that would be released this week is something investors will be closely watching. This would play a major part in deciding whether the Federal Reserve will increase June’s interest rates. This week is therefore very important. The numbers reported in the various reports such as the payrolls report will determine whether the Federal Reserve would announce a rate hike on 15 June or in late July.
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