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Traders See No Reasons to Buy Gold

January 29, 2015 at 23:40 by Vladimir Vyun

Gold futures dropped today, falling to the lowest level in two weeks. The reason for the drop was the same that the reason for rally of crude oil — optimism about US economy. The decline was big enough to erase the previous week’s gains.

There are plenty of reasons why the optimism for the US economy is negative for gold prices. First, the precious metal, being considered a safe asset, often performs poorly when traders feel themselves optimistic and confident. Second, the healthy US economy is supportive for dollar, and bullion usually has inverse correlation to the greenback. Third, positive economic data gives incentive for the Federal Reserve to start raising interest rates early. Higher rates mean that the market participants will turn to the higher-yielding assets that are usually more profitable when the borrowing costs are high.

All in all, there are few reasons to buy gold.

April futures for bullion slumped 2.43 percent to $1,254.60 per troy ounce as of 23:35 GMT on COMEX today, falling to the low of $1,252.01 — the weakest price since January 15.

If you have any questions and comments on the commodities today, use the form below to reply.

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