Gold price drops to lowest level in two months

The gold price has dropped to the lowest level in two months today, according to reports Reuters. The price of the yellow metal has been under pressure for a number of days due to better-than-expected macroeconomic data from the US and a relatively strong dollar. The expectation that interest rates will soon rise again also has  a downward effect on the gold price.

On Thursday, a better-than-expected figure came out on the number of benefit applications. That, too, depressed the Gold price further down. Opinions are divided on whether the U.S. labor market is really improving. Some point to the fall in the unemployment rate as a sign that things are improving. Others prefer to look at the participation rate and still do not see a substantial recovery in employment in that indicator.

Interest rates up?

Minutes of the Federal Reserve's July meeting were published on Wednesday. It also mentioned a possible increase in interest rates. The 'hawks' within the central bank warn of the negative consequences of sticking to too accommodative monetary policy for too long. Although this accommodative policy has a price-pushing effect on stocks, bonds and real estate, it can also lead to economic bubbles. The Federal Reserve hopes to get ahead of that by raising interest rates again incrementally in time.

According to analyst Georgette Boele of the ABN Amro bank, the gold price has already peaked at the beginning of the Ukraine conflict. Since then, interest in the precious metal has waned again.

Strong dollar

The dollar index is almost back to its highest level in eleven months. The interest rate for which the US government can borrow on the capital market is also falling again. At the end of last year, interest rates rose to 3% for a 10-year Treasury, but now they have fallen below 2.5%. The decline may indicate increasing confidence in the dollar, but also a large amount of dollar liquidity seeking yield.

In addition to gold, silver has also been going down in price lately. The Silver Price fell 0.4% to $19.38 per troy ounce and briefly reached a two-month low of $19.25 per troy ounce.