Gold prices continued to decline on Nov. 3, falling for the fourth consecutive session.
Gold nears $1,160 an ounce
December contracts for the precious metal dropped to as little as $1,161 per ounce during the day, later trending higher to reach $1,169.80 at 1:47 p.m. on the Comex in New York, according to Bloomberg. The fact that the commodity moved lower for the fourth day in a row meant it suffered its longest decline since Sept. 12.
Amid these sustained declines, gold has lost 2.7 percent in 2014, the media outlet reported. The precious metal plunged 28 percent last year. Gold fell into a bear market in April 2013, having declined more than 20 percent from the all-time high of more than $1,900 per ounce it reached in August 2011.
The precious metal then continued to move lower, falling below $1,200 an ounce in June. After reaching its lowest point in nearly three years, gold started a recovery, managing to reach a bear market once again in August. Even after hitting this milestone, the commodity still finished the year sharply lower.
Precious metal faces headwinds
Now, gold is facing headwinds from a rising greenback, as the dollar index recently hit a four-year high, Reuters reported. The safe-haven currency recently rose to a two-year high against the euro and a seven-year peak versus the yen. Market participants have begun speculating the European Central Bank will decide to use further monetary easing after its next meeting, which could make the common currency depreciate relative to the greenback.
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The central bank of the euro zone could bolster its existing stimulus measures at a time when many are speculating the Federal Reserve will start hiking its benchmark interest rates soon. The financial institution recently ended its latest round of bond purchases, QE3, which caused the organization’s balance sheet to rise past $4 trillion.
Now, market participants have shifted their focus to the timeline the central bank will use to increase its benchmark borrowing rates. The contrasting policies of the Fed – and other central banks – could easily impact the value of the dollar, which is the only meaningful variable that impacts gold, a trader stated recently, according to CNBC.
Gold ‘all about the dollar,’ says trader
“When you’re talking about the gold trade, my opinion is that it is all about the dollar,” Jim Iuorio, a managing director at TJM Institutional Services and a futures and options trader, stated on CNBC’s “Futures Now.” “If you look over the last six months, you have had a multitude of reasons to buy gold, and every one of them has been ignored. The only thing that really matters is the dollar.”
The U.S. Dollar Index had increased 8 percent year-to-date at the time of report, and Iuorio has predicted the greenback will continue to display strength relative to the euro, which is the largest component of the aforementioned index, the media outlet reported.
Investors who trade gold might benefit from knowing about forecasts such as this. In addition, being aware of the recent challenges the precious metal has encountered could help them make better-informed decisions.
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