Gold Prices Decline Due To Possible Increase In Interest Rate

Gold Prices Decline Due To Possible Increase In Interest Rate

As analysts revealed a possible increase in US interest rates, future gold prices declined with the decline in the demand for the precious metal as a hedge against inflation.

The forecast of Goldman Sachs Group Inc for increased borrowing costs was amended from the first quarter of 2016 to the third quarter of next year due to a better economy. Estimates of other banks were also amended earlier. The benchmark lending rate has been maintained to nearly zero percent by the Fed since December 2008.

Gold prices have been increasing after policy makers at the central bank indicated that the rates will remain the same for some time. Gold declined by 28 percent last year due to concerns that monetary stimulus will be reduced by the Fed with the improvement of the economy.

Archer Financial Services senior market strategist Blake Robben said gold will suffer from the perceived early rate hike. August gold futures went down to $1,317 per ounce or by 0.3 percent. Trading at the Comex in New York was 38 percent lower than the 100-day average for this period. The price of the precious metal increased on July 1 to $1,334.50.

September silver futures also went down to $21.01 per ounce or by 0.6 percent at the Comex. palladium futures for September went up to $868.95 or by 0.8 percent. The price of the metal reached its highest level since February 23, 2001 at $869.60.

Palladium has increased by 8.5 percent in the second quarter following a decline in supplies due to instability on the second biggest palladium producer in the world, South Africa. October platinum futures went down to $1,495.60 per ounce or by 0.8 percent.

Potential changes on the London benchmark fixing will be discussed by the World Gold Council. The benchmark is used as a guide for gold prices during trading.

Posted by James Fried on Wednesday July 09 2014, 5:55 AM EST. Ref: Bloomberg. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0