Why are Gold Prices Falling?

Falling gold

After a steady rise in gold prices during H1 2023, the prices are falling again. Why? And can gold, with its lost sheen, add glitter to your portfolio?

Gold had a really good start in 2023. Even central banks around the world joined retail investors in the gold-buying spree. According to The World Gold Council, central banks worldwide bought more gold than ever before in the first part of any year. Altogether, they purchased a whopping 387 tonnes of gold!

But things changed as we got into the second half of the year. Gold didn’t look as popular anymore as in Q1 anymore.

What’s Happening?

The value of gold has been sliding over the past one month. Back in July, it was worth $2,010 per ounce. But recently, it hit August lows of $1,915 per ounce on August 21, 2023, and we have seen a short price recovery. 

The chart depicts the falling price of gold from highs of July 2023 to lows of August 2023.

Now, the big question is: Why is gold losing its appeal? And what could be in store for our precious gold down the road? Let’s find out. 

Why is Gold Losing Its Shine?

The Dollar Index is causing gold and other metals to lose value. Gold is not the only one affected; most metals are in the same boat. Let’s understand why. Gold doesn’t provide a steady income for investors. On the flip side, US Treasury Bonds are becoming very appealing due to rising inflation and rate hikes, especially in the short term.

To make this clearer, let’s look at some numbers. According to CNBC, the one-month US Treasury Bond offers a 5.411% yield, while the three-month bond provides a 5.50% yield. In contrast, the ten-year bond only offers a 4.18% yield. Since shorter-term bonds give better returns, investors prefer to put their money there for the short term.

Furthermore, the likelihood of the Federal Reserve raising interest rates again this year is also bad news for gold.

According to Mint, gold is suffering because of weak demand for Global ETFs (exchange-traded funds). China’s economy is slowing down significantly, so there is less interest in gold. The SPDR Global Gold ETF saw a significant decrease in its holdings, indicating that people are losing interest in gold as an investment.

What Lies Ahead for Gold?

As per CNBC TV 18, an expert from Metals Focus – Chirag Sheth, believes that the gold market’s prospects in the upcoming festive and wedding season will be positive.

Furthermore, the report explains that the rural economy is expected to thrive as we head into the sowing and harvesting season. This, combined with the approaching wedding season, will likely boost the demand for gold soon.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The article is for information purposes only. This is not an investment advice.

*Disclaimer: https://tejimandi.com/disclaimer

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