Tallahassee Journal

Bears hammer gold prices

Bears hammer gold prices

Gold futures fell $20.10 an ounce, or 1.64%, to $1,207 in early trading Tuesday at the New York Mercantile Exchange. Investors often see gold as a safe haven when inflation looms or when the value of the dollar tumbles on international currency markets. But inflation clocked in at 0.8% in December, according to the Bureau of Labor Statistics. (That’s including the volatile food and energy components. Without food and energy, the CPI rose 1.6% in December.)gold2

More troubling for gold, however, is the relentless march upward by the U.S. dollar. Gold usually falls when the dollar rises, and vice-versa. A euro now costs $1.14, according to FactSet, down from $1.21 at the start of 2015 and $1.38 a year earlier. Worries about a Greek default and war in the Ukraine have only pushed the dollar higher — and gold lower.

Also driving the dollar up and gold down: Even though U.S. interest rates are low by historical standards, they’re giants compared with what other countries are offering. The 10-year U.S. Treasury bond currently yields 2.09%, vs. 0.34% in Germany and 0.39% in Japan. Higher rates draw money to the U.S., which props up the sawbuck — and drives down gold. The yellow metal hit a 2015 high of $1,296.75 on Jan. 22, according to precious metals dealer Kitco, and peaked at $1,895 an ounce in 2011.


November 2017
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