Gold price heads lower as US dollar firms on US Fed chairman news

Gold price heads lower as US dollar firms on US Fed chairman news
Written by:
Ilona Billington
17th October 2017
Updated: 11th October 2019

The gold price moved lower Tuesday, as a firmer US dollar weighed on prices. However, ongoing concerns over North Korean tensions, limited the fall.

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The dollar has edged higher against a range of currencies on news that US President Donald Trump is considering a hawkish Federal Reserve Bank chairman to replace current leader, Janet Yellen. Yellen’s term will end in February 2018.

Gold is priced in US dollars, so when the dollar becomes stronger, gold becomes more expensive, which tends to push the valuation of the yellow metal downwards. However, it’s use as a safe-haven investment often underpins any downward move, particularly when geo-political concerns are on the rise.

Gold price volatility

While the gold price has moved lower Tuesday – it’s almost 1% lower as the US trading session is set to get underway shortly – volatility is ensuring its value doesn’t sink too far.

While a stronger dollar naturally weighs on the price of gold, other developments are supporting the value of gold.

Simmering tensions between North Korea and the US remain close to the surface. Meanwhile, continued Iraqi-Kurdish military action, is another detail that’s underpinning investors preference to buy gold as a safe-haven.

Future outlook

As a confluence of activity buffets the gold price, the managing director of commodities markets research firm, CPM Group said he expects the price of gold to hit a fresh record high by 2020.

In an interview with Macro Voices, the experienced commodities businessman, Jeff Christian, said: “By 2020–2022 we would see record high gold prices in terms of nominal annual average prices.”

“Over the next few months the price is probably going to move back up toward $1,340 to $1,360 – into late November and December,” Christian said. “Then getting into 2018, depending on what happens in the global financial markets, we think that the gold price will probably continue to rise at perhaps a slightly faster rate,” he added.

The gold price was a round $1,288, shortly after midday in the UK, Tuesday.

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