Gold’s collapse continues

The possibility of US rate rises continues to weigh on gold sentiment.

Last week’s comments from Janet Yellen are still hanging over the markets and nowhere is this more obvious than with the gold price. The Federal Reserve’s comments last week inferred that US interest rates could rise in six months’ time. Considering how many years they have been held at these low levels for, the comments caught traders off guard.

The general consesus was that the Federal Open Market Committee would want to end its current debt-purchasing scheme before increasing the interest rate. This timeline is either very ambitious or infers an overlap between the two events happening.

Gold does not generate an income; only a capital gain. It has always been susceptible to interest rate moves and the knock-on effect this has with holding competing asset classes. The underlying demand for physical gold has been subdued in the last four weeks. This has also aided the move lower in the precious metal as both investors and jewellers have eased back on purchases.

Today has seen gold dip below the 50-day moving average, and any close below the $1308 level could be taken as a signal that lower lows for March will be set. 

Spot gold chart

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