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The gold price slumps to a 15-month low

by , 06 October 2014

Gold is struggling. If you've watched the price of gold this year, you'll have seen how the yellow metal has struggled to maintain any gains made.

It kicks off the week wallowing at a 15-month low. And gold isn't the only precious metal struggling.

So what's going on with the gold price?

Let's take a closer look…


The dollar took strength from positive US jobs data


The gold price is feeling the pressure of an ever stronger dollar, reports Fin24. The greenback got an additional boost on Friday as jobs data out of the US came out much better than expected.

The stronger dollar is also draggling down other dollar-denominated precious metals, like platinum and silver, adds Fin24.

Since its highest level this year of $1,345 in July, the price of gold is down 11%, says BDLive. It’s now not far off of a four-year low of levels below $1,180,

Have a look at the chart below showing the gold price over the past three years…


 


The stronger dollar has led platinum “to a five-year low,” notes Bloomberg. Silver is now trading to its lowest level “since 2010”.

Historically, gold tends to perform when there are geopolitical events, says Fin24. But gold has “failed to capitalise” on any of the developments in Ukraine, Iraq and Syria.


Gold and other precious metals are at the mercy of a strong dollar


Robin Bhar, an analyst with Societe Generale, says the fall in precious metal prices “shouldn’t come as a surprise,” notes BDLive. He puts this down to several reasons including the monetary policy tightening in the US, a strong dollar, expectations of interest rate hikes in the US and increased commodity supply from China.

An expected rise in US rate takes the shine off gold as “the metal generally only offers investors returns through price gains,” adds Bloomberg. Not only that, the stronger dollar “typically cuts demand for a store of value”.

At time of writing, gold was trading at $1,196.67, platinum at $1,230.50 and silver at $17.10.

So it’s not looking good for gold and other precious metals as the dollar continues to strengthen and investors look to coming rate hikes in the US.

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The gold price slumps to a 15-month low
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