Gold Continues Sliding, Hits 5-Year Low

By MATTHEW COWLEY and  BIMAN MUKHERJI
Updated July 20, 2015 4:18 p.m. ET

Gold prices fell to five-year lows on Monday, weighed down by the dollar’s relentless gains as the prospect of the first U.S. interest-rate increase in more than nine years loomed.

Gold for August delivery, the most actively traded contract, closed down 2.2% at $1,106.80 a troy ounce on the Comex division of the New York Mercantile Exchange, a level last seen in March 2010.

Silver prices sank to their lowest level since August 2009, and platinum closed below $1,000 a troy ounce for the first time in more than six years.

Gold and other precious metals fell prey to a renewed bout of selling in commodities markets last week after Federal Reserve Janet Yellen appeared to give her strongest signal yet that rates in the U.S. would start to rise, possibly later this year.

The move toward a more normal environment for interest rates would bring an end to the extraordinary period of low rates. Higher interest rates would make the dollar more attractive to investors looking for higher-yielding assets. Over the last 12 months, The Wall Street Journal’s U.S. Dollar Index has risen 22%, mostly in anticipation of a rate move by the Fed. The dollar’s gains are a burden for commodities, which are priced in the U.S. currency and become more expensive for overseas buyers when the dollar gains in value.

Financial markets have been adjusting for a return to normality for some time. As the U.S. economy started to gain traction, unemployment fell and inflation remained subdued, the possibility of an interest-rate increase became more apparent. That has led to the decline in the price of gold, which tends to be seen as a haven asset.

“The most important dynamics that have contributed to the drop in gold prices are a stronger U.S. dollar, improving investor sentiment in financial markets, and expectations that the U.S. Federal Reserve will start hiking interest rates this year,” said Georgette Boele, coordinator of foreign exchange and precious metals strategy at ABN Amro.


Source from : The Wall Street Journal