Gold News: Gold Near Five Year Low
Gold News
The rout on gold has continued as the precious commodity fell to a near five and a half year low on Friday. A stronger dollar and expectations for a US interest rate hike have caused investors to sell gold and short future contracts. Gold had benefitted from loose economic policy in recent years as it was easier to compete with yield-bearing assets. But in the face of tightened monetary policy, investors are shifting their investments elsewhere.
A stronger dollar helped spark the sell-off of gold, as the greenback advanced against other major currencies in trading last week. Gold is traded in dollars, so a stronger dollar makes buying gold more expensive for holders of other currencies. Federal Reserve Chair Janet Yellen’s comments confirming a likely interest rate hike this year, and investors now appearing to be buying the dollar as a safe haven investment instead of gold. The most actively traded gold contract was for August delivery, and it fell to its lowest close since February of 2010.
Oil prices also fell to a multi-month low on Friday, with US prices falling 20% from their June highs. After losing much of its value late last year, oil slightly rebounded due to falling oil rig counts as cuts to the industry were expected to rebalance the market. However, oil producers have proven to be more resilient than previously thought, with US production remaining near multi-decade highs. In fact, the number of rigs actually increased last week by 21, as oil rig counts appear to have found a bottom.
