Recently, the price of gold decreased after almost reaching a six month high of over $1380 on March 16. That week was particularly impressive for gold as it increased in value by an impressive 3.25%. Additionally, the SPDR Gold Trust, the globe’s largest gold fund, increased its gold holdings by 10 tonnes to a total of 813 tonnes. This amount is actually more than the total of Australia’s gold output on an annual basis.
Why Did Gold Increase in Value?
Gold mainly increased in value with the turmoil regarding the situation in Ukraine. However, overall, gold increased in value in early 2014 due to the uncertainty of China’s economy, issues in emerging economies, and due to the relatively weak performance of the US dollar.
Why did the Price of Gold Recently Decrease?
As mentioned previously, the price of gold decreased this week. Specifically, early this week gold began to make corrections and declined in price. Why? Well, the situation in Ukraine appears to have stabilised somewhat for the time being. More recently, the Fed chairperson Janet Yellen stated that short term interest rates may rise sooner than expected.
Results of the Fed Announcement
After Yellon’s remark was made, the price of gold continued to decrease in value. Overall, the value of gold decreased nearly 5% in value within four days. This turn of events is not good news for gold as an investment as when interest rates rise, gold is not viewed as a favorably. In addition, the easing of international political tensions and the overall stronger US dollar also hinders the value of gold.
However, if tensions surrounding Ukraine and related areas increase, this situation may have the potential to drive up the price of gold once again.
