The fund is on track for its biggest weekly outflow since early May.
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Elsewhere, silver also regained some lost ground on the back of speculative buyout. Every time the rupee crashes against the dollar, gold prices in India go north.
After a positive start to 2015, gold prices languished around the US$1,200 mark for much of the second quarter before sliding to a 5-1/2-year low of US$1,077 on Friday.
Prices remained under pressure for the 10th day in the global market, where the yellow metal hovered around five-year low rates as a bounce in the dollar fuelled a downside momentum. If that happens, then gold prices will drop. Previously big government buyers of gold are also not active in bidding up the price these days. The obvious: gold (NYSEARCA:GLD)prices have fallen from a peak near $1,900 an ounce in 2011 to around $1,100 an ounce today-their lowest level since the beginning of 2010. Rising rates lift the opportunity cost of holding non-yielding gold, while boosting the dollar, in which it is priced.
“Gold has always had a dual nature as a currency and a commodity”, Macquarie analysts including London-based Matthew Turner said in a report Friday. If you are accumulating gold for your daughter’s wedding 10 years hence, you will be better off investing in growth assets for the period and using the gains to buy gold when you need it. If you love gold jewellery and want to buy for immediate consumption, this a good price to buy. Some demand emerged for physical metal, however. That means that investors will think twice about parking their money in gold because gold doesn’t pay interest or dividends. Gold provides neither a dividend nor an income, so when markets improve, interest rates rise and returns on other investments tend to increase as well. He noted that gold would need to drop to about $850 an ounce to bring the value back to historical averages.
While the analysts expect gold will probably end up around $1,050, they do say an interest rate hike in the U.S., another correction in China’s stock market, and further selling of reserves by central banks could result in that worst-case scenario of $800 (and some very grumpy gold bugs). The high in jewelry demand in 1999-2000 coincided with a 20-year low in the gold prices, while the low in 2009 occurred during the gold bull market.
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“With major gold miners struggling to replace reserves, production may begin to decline and higher prices will be required to justify the next round of large capital expenditures”.
