Gold on Friday plunged more than $30 an ounce after a better-than-expected US jobs report saw the dollar soar to multi-year highs.
In heavy trade of more than 20m ounces in New York, gold for delivery in April fell $32.33 an ounce or 2.7% from Thursday’s close hitting a low of $1,163.87 an ounce during one of the worst trading days in a year.
Gold is now at the lowest price since mid-November and more than $140 below its 2015 high struck January 22. Gold’s gains earlier this year were ascribed to safe haven buying amid currency turmoil, a slowing global economy, geopolitical concerns, the fallout of the collapse in oil prices and a debt crisis in the eurozone.
But with the first hike in more than six years likely at the Fed’s June meeting raising the opportunity costs of holding gold, traders refocused their attention on fundamental factors.
Gold reacts counter to confidence and it would appear that there is a lot of confidence in the market. Higher rates also boost the value of the dollar which on Friday hit fresh 12-year highs against the currencies of major US trading partners. The greenback has strengthened by more than 20% over the last year.
Ahead of Friday’s market action MINING.com sat down with Rick Rule, Chairman of Sprott Asset Management, at the PDAC mining conference in Toronto and asked him about the impact of the world’s reserve currency on the price of the metal.
“Gold reacts counter to confidence and it would appear that there is a lot of confidence in the market particularly regards the US dollar – the gold price trades inversely to the US dollar. Gold’s done extremely well in every other currency, but the USD has done better.”
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