Gold Prices Decline as the European Central Bank Announces a Possible Interest Rate Cut

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Gold Prices Decline as the European Central Bank Announces a Possible Interest Rate Cut
Gold Prices Decline as the European Central Bank Announces a Possible Interest Rate Cut

Gold Prices Decline as the European Central Bank Announces a Possible Interest Rate Cut

As the traditional consumer of gold, India is not consuming as was expected, the gold prices are falling apart. In fact, gold bullion jewelry demand in China was 164 tonnes which is an increase of 29% from the same period in 2012; it still cannot cover what India consumed. The global prices are falling to a great extent and according to the World Gold Council, in the third quarter of 2013; the global gold market remains resilient.

Marcus Grubb, managing director of investment at the World Gold Council admits that consistent with the first two quarters of 2013, the global gold market remains resilient. He however, says that it has been underpinned by the continued shift in demand from West to East, strong demand in consumer categories and solid central bank and technology sectors.

Another report coming from the European Union tell that gold has been under pressure since the European Central Bank announced a surprise interest rate cut earlier this month. According to market observers the decision has prompted investors to invest less in gold, particularly, the value of the dollar versus the euro and made dollar-denominated assets has gone up.

Gold Prices to Fall Further Say Estimates

There has been further damage to the gold prices after the indications that the Fed will not take away the entire bond-buying program, rather, curtail it to some extent. Thus, when quantitative easing is going to continue, the gold prices were expected to fall. Additionally, gold prices managed to hold above $1,240 an ounce, which is a decent price.

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The recent trend in the bullion market it that hedge funds got less bullish on gold. Thus, cutting their net-long position to a four-month low, before prices capped the biggest weekly retreat since September, investors are willing to invest elsewhere. In fact, gold fell 6 percent this month and heading for the worst slide since June.
Record Declining in 2013

It is to be noted that in June this year the gold prices reached a 34-month low. The trend is being followed by the gold futures which dropped 3.3 percent last week, the biggest slide since Sept. 13.

Till this date in the year, the gold prices have gone significantly lower as the yellow metal has slumped 27 percent. The impact was seen when the Standard & Poor’s GSCI gauge of 24 commodities dropped 4.5 percent.

To contact the reporter of this story: Jonathan Millet at john@forexminute.com