The curious case of the fall in gold price per ounce. In fact, gold prices per ounce are down nearly 20% since their recent March high. That puts the precious metal on the cusp of a bear market, which is strange because now should be the perfect time to own gold. So, what is behind the curious case of a fall in gold price per ounce? Combined with other factors, the Federal Reserve's aggressive interest rate hikes have led to the U.S.UU.
This makes gold more expensive for foreign investors, since gold transactions are usually made in dollars. This can reduce demand and drive prices down. In addition, bond yields have risen, making gold seem like a less attractive option for investors. Carroll sues Trump when the window opens for sexual abuse survivors' lawsuits Arrest warrant issued against a friend of a North Carolina woman found dead in Mexico Ford recalls more than 634,000 SUVs due to fuel leaks and fire hazard.
The dollar points to a fall in gold prices, Przemyslaw Radomski, chief executive of investment advisory firm Sunshine Profits, told Forbes via email. The emergence of compelling and rapidly growing new asset classes, especially cryptocurrencies, has raised questions about the popularity of traditional investments, such as gold. However, George Milling-Stanley, chief gold strategist at State Street Global Advisors, does not believe that the recent correction in the price of gold is a cause for concern, as the Federal Reserve's projections of rate hikes are far off. While gold is considered a safe bet during economic uncertainty, rising interest rates increase the opportunity cost of holding unprofitable ingots.
Lloyd admits that, while Bitcoin and other cryptocurrencies could eventually serve as a hedge against inflation, just like gold, due to their limited supply, the price of Bitcoin is influenced by too many other external factors, such as regulatory concerns, the adoption of companies and the creation of their own digital assets by governments, such as the creation of their own digital assets to consider them a hedge against inflation at this time. But Lloyd points out that cryptocurrencies are a “very speculative asset class”, while gold is a much safer and much less volatile alternative. Interactive chart with historical data on the real (inflation-adjusted) prices of gold per ounce up to 1915. Last week, gold achieved its worst weekly performance in 15 months due to concerns that the Federal Reserve will raise rates sooner than expected. The series is deflated using the main consumer price index (CPI) with the most recent month as the base.
Since the Federal Reserve seeks to raise interest rates sooner than expected, that means it seeks to control inflation ahead of schedule, and given that gold has historically served as a hedge against inflation, “the market sees this news as negative,” Luke Lloyd, investment strategist at Strategic Wealth Partners in Independence, Ohio, told Forbes. Gold prices have been falling because the Federal Reserve indicated higher interest rates in response to expectations of rising inflation, but the performance of the yellow metal depends on a complex number of factors, including Treasury bond yields, the money supply and the strength of the dollar. Markets have fully discounted an interest rate hike of at least 75 basis points at the end of next week's Fed policy meeting, possibly even up to 100 basis points. Inflation data has combined to keep buyers of gold and silver mostly on the sidelines, Jim Wyckoff, senior analyst at Kitco Metals, said in a note.
However, Lloyd believes that the Federal Reserve currently underestimates the impact of inflation and predicts that the central bank will become “more aggressive” over the next year, indicating that interest rate hikes even earlier, perhaps next year, are likely to be negative for gold, meaning he doesn't see the current scenario as a buying opportunity. .