Gold prices are edging closer to a two-month low following increased pressure thanks to a stronger US dollar.
Monday (August 25th) saw gold drop 0.3 per cent to $1,277.19 (£770.20) by 13:52 EDT with experts highlighting stronger US economic data and a significant improvement in global financial markets as the key factor behind this decline. It follows gold prices dropped by a weekly amount of 1.8 per cent, the biggest fall in a month, and set a two-month low of £1,273.06 late last week.
The US economy was one of the defining factors behind the drop in gold price. The nation's benchmark Standard and Poor's (S&P) passed the 2,000 mark for the first time prompting optimism that the European Central Bank would react to boost economic growth to trigger an increase in global financial markets.
It has been a highly positive recent week for the S&P 500 Index, as not only did it manage to push through the 2,000 barrier but also hit a record finish for the 29th time this year. Over the course of Monday, the S&P 500 grew by 9.52 points to 1997.92, an 8.1 per cent increase on the same period a year earlier. It is on track to beat 2013's record of hitting an all-time high on 45 occasions throughout the year.
The buoyancy on the S&P 500 has now impacted on the gold market, HSBC precious metals analyst James Steel said: "Equity markets continue to be strong, robbing gold of the opportunity to go higher."
The drop in bullion price has attracted jewellery buyers from Asia with the premiums for gold bars in Hong Kong standing between 70 cents and $1.10, which had been made possible due to the amount of interest from jewellers.
Find out about commodities trading and learn CFD strategies at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.