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Top 5 Factors affecting the Gold prices in the USA

The Gold slides to 10-month low since early February this year. After a decline of the oil prices, it might be a turn of the gold. The reason behind this low rate is US interest rate, a surge in treasury yields, and appreciation of the dollar. The gold has been the major source of investment in the USA market. However, this trend might be facing the downfall now. Let us discuss the top five factors that are affecting the gold prices:

The relation of US Dollar and the gold

The dollar is currently at 14-month high after Mr. Donald trump selection as a president of the USA. The investors are diverting their investments in the dollar rather than gold. The USA dollar is stabilizing and soon $ 1 could be worth 1 Euro Last time it happened in 2002.

Trump may make the inflation great again

The interest rate affects the gold as well. How will it affect the gold? The increase in the interest rate by the USA Federal Reserve Bank was the talk of the town this week. Moreover, the analysts are predicting more rises in the interest rates in the coming years.  The increase in the interest rate will attract the investors that will expect a better return on their money. Mr. Trump promised to decrease tax rates and support the infrastructure. His business-friendly policies can increase the inflation in the United States. The Federal Reserve will keep increasing the rates to keep inflation at the bay.

Greater yield at Treasury bonds

Purchase the bonds and sell the gold, but why? The investors always want higher interest rates and the better economic conditions. The yield rate is more than 2.5% on the 10-year Treasury bond. This happened after September 2014. The rise in the rate will encourage the investors to sell their bonds for higher yield. This money market growth is affecting the yellow gold, where investors are feverishly buying bonds for the higher yield.

 Oil prices

The oil prices are on the rise after the output cuts. After the OPEC meeting with the NON-OPEC countries, the main oil manufacturer that includes Iran and Saudi Arabia was agreed to cut production. The US crude settles at $51.90 with a rise of $1 a barrel. But, the gold is still a better investment as compared to the oil prices. On the other hand, if the oil producers comply with the agreement, the gold investors might be diversifying their funds into the oil for a better return.

Rise in the geopolitical tensions

Trump win because of the Russian hackers and China navy has seized a USA underwater drone in the South China Sea. Both this news was the hot topic of week .This geopolitical tension was weighing risk appetite and providing a bit of lift to the gold.

Finally, it’s good news for the gold investors. This yellow metal is always considered as a safe haven for the investors. As we already mentioned in this article that the investors favor friendly economic and political environments.  Because of the Russia and china conspiracy, the investors may turn to safe investments again.

 

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About Emaad Qureshi