Gold Prices Fell, Strong Dollar and Weak Investment Blamed

SEATTLE (Scrap Monster): The Gold Market Commentary published by the World Gold Council (WGC) indicates that gold prices fell during the month of this year, mainly due to strength in dollar and weak investment demand for the yellow metal.

The softening inflation expectations and continued strength in U.S. dollar stimulated negative sentiment for gold market, with prices falling by 3.5% during the month. The prices were weighed down by strong US dollar and sticky real yields during the initial half of the month, noted WGC.

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The gold prices recovered during the second half of the year, driven by softer inflation expectations and jobless claims which nudged the dollar and real rates down. However, the rebound in gold prices in the latter part of the month was not enough to offset earlier losses. It must be noted that gold prices had dropped 6.2% until mid-July.

The trade body foresees further weakening of dollar, mainly on account of expectations of a less hawkish US monetary policy environment and high investor cash allocations. This in turn may trigger a more sustained recovery in equities and commodities. Also, WGC expects gold to further rebound in the near future. The net shorts in gold futures too indicate chances of positive gold returns going forward.