Hopes of gold holding at the September lows have proven false with gold continuing to fall to be barely holding above $1,700 an ounce.
The inflation data out of the US earlier in the week confirmed fears that the rate of the consumer price rises is still yet to peak and emboldening the need for the Federal Reserve to issue further aggressive rate hikes later this month and in the subsequent months.
In this climate, the talk has moved on from the potential of another 75 basis point increase to the possibility of the Fed hiking by 100 basis points when it meets at the end of this month.
Live Gold Price – $/oz
Such sharp moves by the US central bank put gold under dual pressure as it typically sees the dollar strengthen as well as reducing the appeal of a non-yield bearing asset like gold.
Gold’s plunge has been pretty dramatic considering that it is typically less volatile than other asset classes yet it has seen about $100 wiped off its value so far in July. Investors will be clinging to the hope that $1,700 proves a threshold at which sufficient buying support kicks in to stem further declines. However, it was only a few weeks ago that similar thoughts were being said about $1,800, which ultimately offered up very little resistance.
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