Gold slipped approximately 1 % last week after Iran and six world powers came to an agreement to curb Tehran’s nuclear programme which led to an easing of political tensions that drove oil prices lower and boosted the dollar and equities.
The precious metal was similarly weighed down by apprehensions of a possible early end U.S. stimulus measures as well as one of the largest drops in the past three weeks which held the largest bullion-backed exchange traded fund.
Spot gold has been at its lowers since the third quarter which was at $1,227.93 an ounce in earlier trade and was actually down at $1, 230.48 by SA time. Whereas U.S. gold future fell 1.1 % to $1,230 an ounce.
While European shares were heading towards a five-year high following an intervening deal which cut short Iran’s sensitive nuclear project activities, the dollar rose 0.2 % which consequently led to a suspension of some U.S. and E.U. Sanctions on Iran’s economy during the said six-month period.
The easing of the tensions and the prospects of an increase in oil supply also weighed significantly on the price of crude oil which w is presently at $2 a barrel which was its largest drop in more than three weeks.
The problem at hand is still the monetary constricting in the U.S. that is definitely going to endure as long as gold comes back to further down the pressure on existing market prices.
Stimulus doubts still linger
Investors are still unsure that the U.S. Federal reserve could begin rolling back in its monthly bond purchases, known as quantitative easing and with the year end fast approaching, it is predicted to be back stronger based on U.S. economic data.
The latest sentiment still remains bearish much of the sentiment will still be dependent on the data with bearish implications for the precious metal by the next succeeding years if it will still remain to be in favour of better returns with less need for inflation or safe-haven hedging.
The U.S. central bank’s $85 billion in monthly bond-purchasing has bolstered gold prices in recent years by ever-increasing its appeal as a hedge opposing inflation.
Traders who were carefully under watch regarding the developments in the East China Sea after the United States and Japan criticised China’s move in mandating new rules in airspace over islands at the heart of a territorial dispute with Tokyo citing that any escalation in the tension would inevitably increase gold’s safe-haven appeal.
The holdings in SPDR Gold Trust, the global leader in gold-backed exchange-traded fund and the best measure of investor sentiment declined last week from 4.5 tons to 852.21 tons which was their lowest figure in nearly four years.
Finally, silver was down 0.9 % respectively at $19.69 per ounce, its lowest since the third quarter at $19.54 while spot platinum rose 0.2 % to 1,380 an ounce whereas spot palladium was fairly constant at $715.47.