Gold price to lowest level in four weeks

The gold price in dollars fell to the last week lowest level in four weeks, after the Federal Reserve announced its plans to reduce its balance sheet. The reversal of the stimulus program gave a rebound to the US dollar, the currency that has performed rather poorly against other currencies since the beginning of the year.

Another explanation for the declining Gold price is that the threat from North Korea has faded into the background for the time being. U.S. President Trump and North Korean leader Kim Jong-Un have been harsh on each other in recent days, but at the time of writing it has remained just words. As a result, there is still hope for a peaceful solution, which will have to be achieved through diplomatic channels.

Gold price under pressure

The gold price dropped to $1,290 per troy ounce on Thursday, about two percent lower than at the beginning of this week. The price of a troy ounce has already fallen by almost $60 from the high of $1,357.54 earlier this month.

An important part of this decline is related to the strengthening of the dollar. The Federal Reserve announced that interest rates will be raised one more time this year and that they should be gradually brought to 2.75% in the coming years. The prospect of rising interest rates pushed the dollar up against other currencies and caused the price of gold to fall.

Gold vs Dollar

Traditionally, gold and the dollar often move in opposite directions, as the precious metal is seen by many investors as a kind of gauge for the dollar. If the dollar or the U.S. economy are doing badly, this translates into a higher gold price.

In theory, rising interest rates are unfavorable for the precious metal, but this movement cannot be seen in isolation from inflation. As long as interest rates remain low or even negative after correction for inflation, it remains beneficial to own gold.

Gold price in dollars to lowest level in four weeks