FT: Gold market left staring at Fed keen to raise rates
Not so shiny anymore.
Gold has hit a five year low after a five day losing streak, as expectations of a first US rate hike in almost a decade weigh on the price of the precious metal, writes Joel Lewin.
The price of gold has dropped 5 per cent in the last month to a 5-year low fo $1144.28 per troy ounce. It has fallen 13.2 per cent in the last 12 months and 40 per cent in the last five years.
In her testimony before congress on Wednesday, Fed Chairwoman Janet Yellen talked up the prospects of the US economy, raising expectations the first hike will come in September. Gold promptly flopped.
Writes Edel Tully at UBS:
Gold offers no yield, which is not dissimilar to many other asset classes whose yields have tumbled to near-zero levels during this period of sustained low interest rates. However, when the Fed begins to hike rates yields on bonds and other assets will rise, meaning gold becomes less attractive relatively.
Gold has not received the safehaven boost it might have expected from the crisis in Greece and the Chinese stock market crash, with investors preferring other options.
Gold tracking ETFs, which is the preferred method of many investors seeking gold exposure, have seen heavy outflows of late. The funds have seen outflows in 17 weeks out of the last 26. $245m has flowed out in July, $421m poured out in June and $844m left in May and in March a whopping $2.4bn was whipped out of gold ETFs, the largest outflow in two years.
