Gold price drops below 50-day average

Gold prices fell below the $1,300 per troy ounce mark this week due to better-than-expected data on the U.S. economy and expectations that the Federal Reserve will raise interest rates further this year.

Also, the price fell below the 50-day moving average for the first time since July, which is a warning of a further decline for technical analysts. When the price of the precious metal fell below the 50-day average in June, a further decline of 3.8% over a three-week period followed.

The Gold price has already fallen by more than five percent compared to the peak at the beginning of September. This week, the price in dollars dropped to $1,280 per troy ounce, while the gold price in euros lost the price gain of the beginning of this week.

Gold price below 50-day average for the first time since July (Source: Bloomberg)

Federal Reserve interest rate hike

Federal Reserve Chair Janet Yellen said Tuesday that a gradual rise in interest rates is most appropriate in an environment where there is a lot of uncertainty about the level of inflation.

The central bank wants to "normalize" interest rates to a level of around 2.75% in the coming years. It also wants to reduce its balance sheet by putting mortgage loans and government bonds back on the market. These statements gave investors more confidence in the U.S. dollar, which traditionally has a negative correlation with gold.

Stronger dollar?

Bloomberg's dollar index hit its highest level since mid-August this week, ending a long rally in the euro. At the beginning of this year, many investors and analysts were still under the impression that the two most important currencies would move towards parity, but in the end it turned out that the dollar in particular was sinking further and further. The euro peaked at an exchange rate of around $1.20 but has since fallen a few cents again. Now that the dollar is strengthening again, there is a good chance that gold will once again enter a negative trend.