Why gold is plunging despite market volatility – by Paul R. La Monica (CNN Money – July 31, 2018)


Gold is supposed to be a haven, a place for investors to turn during tumultuous times. But in the middle of a trade war, gold has fallen into a correction, down more than 10% from its high for the year.

Why has the price fallen lately? Simply put, it’s the strong US dollar. Expectations for more interest rate hikes by the Federal Reserve have helped lift the value of the currency. A stronger dollar often is a bad thing for gold because it makes the metal more expensive for international investors.

“The yellow metal has clearly struggled to register any meaningful recovery in recent weeks, despite global trade tensions creating uncertainty,” said Lukman Otunuga, research analyst at brokerage firm FXTM, in a report to clients.

The Fed is not expected to raise interest rates at its policy meeting this week. But investors will be eying the statement from the central bank closely, especially after President Donald Trump criticized the Fed’s rate-hiking policies.

Naeem Aslam, chief market analyst with Think Markets UK, said in a report that if the Fed continues to show confidence in the economy, the market would take that as a sign that two more rate increases are likely this year.

For the rest of this article: https://money.cnn.com/2018/07/31/investing/gold-prices-dollar-federal-reserve/index.html

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