Gold plunges, should buy or sell?
The world gold price fell deeply after the monetary policy meeting of the US Federal Reserve (Fed).
Newly released data shows that the growth of the world's leading economy is better than forecast. U.S. gross domestic product (GDP) in the second quarter grew by 2.4%, beating economists' expectations, the Bureau of Economic Analysis said. Economists expect a 1.8% gain.
Besides, data showing that the strength of the US labor market is also a factor causing gold to reverse. According to the US Department of Labor, the number of weekly jobless claims fell by 7,000 compared to the previous week.
Newly released data shows that the growth of the world's leading economy is better than forecast. U.S. gross domestic product (GDP) in the second quarter grew by 2.4%, beating economists' expectations, the Bureau of Economic Analysis said. Economists expect a 1.8% gain.
Besides, data showing that the strength of the US labor market is also a factor causing gold to reverse. According to the US Department of Labor, the number of weekly jobless claims fell by 7,000 compared to the previous week.
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The market received a good 25 basis point hike from the Federal Reserve on Wednesday.
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Stock markets in Asia and Europe both recorded gains in overnight trading. The US stock index also rose at midday and is at or near its highest level of the year
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In other news, the European Central Bank made a slight increase in its annual key interest rate at its monetary policy meeting today, as expected.
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Looking to the longer term, George Milling-Stanley, director of gold strategy at State Street Global Advisors, thinks the precious metal will remain supported by fears of a looming recession. “People are still concerned about the health of the economy, and uncertainty is good for gold. I don't think that uncertainty will go away anytime soon," he said.
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The expert added that, even if a recession is avoided, the Fed's aggressive monetary policy will slow growth. “While not a perfect environment for gold, low growth and persistent inflation are still positive for the precious metal,” said Milling-Stanley.
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With the above developments, investors may worry that holding precious metals will be disadvantageous. Therefore, when the world gold price traded in the area of 1,980 USD/ounce, they sold out massively to recover capital.
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Gold is very sensitive to rising interest rates. Rising interest rates will reduce the attractiveness of gold because it increases the opportunity cost of holding non-yielding assets like gold.
