Gold drops below $1200

The price of gold has fallen again today, hitting its lowest price today for nearly three years.

Several US economic indicators beat expectations today, reducing the appeal of the safe-haven precious metal. Spot gold was trading down 2% at $1201.5 per troy ounce by mid-afternoon in New York, after breaking through the $1200 barrier earlier to touch a low of $1196.75, the lowest level since August 2010.

The number of individuals filing for unemployment insurance for the first time fell last week by 9,000 to 346,000, which was just about in line with expectations. The drop takes the four-week moving average down to 345,750, and suggests the labour market is slowly improving.

A separate report showed that consumer spending bounced back in May, climbing 0.3% after declining in 0.3% April, while personal income rose 0.5% in May.

The most positive data was from the housing sector, with the National Association of Realtors revealing that pending home sales leaped 6.7% last month. Based on data we’ve seen this week, the housing market is showing few signs of being held back by the rise in mortgage rates.

All these positive signs for the economy are not good for gold, especially given that inflation shows no signs of heating up. A slow growth, low inflation environment is not the kind of story that supports the price of gold.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.