Gold drops as dollar rises

The price of gold is off by 1.2%, as fears of tapering from the Fed have given the US dollar strength.

Gold is in the red for fifth trading session in a row, pushed down as the US dollar has risen due to speculation that the Federal Reserve will trim its stimulus package. Last night, Richard Fisher of the Federal Reserve stated that the drop in US unemployment could bring the Fed one step closer to cutting back on the size of its bond-buying programme.

The rate of unemployment in the US is currently standing at 7.4%, and the Fed has made it clear that its unemployment target is 6%. So if the job market improves we could see the price of gold harmed further by the US dollar growing stronger.

However, the financial markets do not trade in straight lines, so even though the precious metal has lost ground in the previous five days we could see short covering in the next day or two.

Tonight, Charles Evans of the Fed is due to speak at 6pm. If his comments suggest that the bond-buying scheme will remain in place for the foreseeable future we could see the price of gold trade higher.

Spot gold chart

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