Dollar strength amid hopes for a decreased interest rate and Middle East tensions caused gold price dips

The price of gold fell by 0.4% to $2,507.96 an ounce as investors became less interested in the metal due to the strengthening US dollar. Nevertheless, confidence in the impending rate reduction in the US limited losses.

With the dollar index creeping upwards, this made holding other currencies less attractive considering the price of gold was slightly higher than what I would pay for it in my own country. Just like gold prices in the other countries, U.S gold futures prices fell by half a percentage point.

In non-yielding bullion such as gold low interest rates tend to be advantageous because they are contextually attractive assets. A further driver for this increase in demand has been experiences of central banks as well as geopolitical risks.

In previous cycles of declines in Federal Reserve interest rates gold has performed well and thus is seen as an effective hedge against economic uncertainty and war crises.

Tensions in the Middle East including Hezbollah and Israeli army actions continue to weigh heavily on worldwide stock markets leading economists to believe that these tensions might affect their countries’ economies.

Other metals performed differently: spot silver rose 0.4% to $29.93 an ounce; platinum dropped 0.5% down to $957.55 while palladium slightly went up from $959.80.