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Gold Prices Decline for the First Time in the Last 6 Days

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Gold’s price movement

This series provides an analysis of gold prices and market fundamentals. For an in-depth look at gold and related companies, sectors, and drivers, please refer to our Gold ETFs page.

June gold futures declined by 1.70% on May 19, 2015, and settled at $1,206.70 per ounce. Prices declined for the first time in the last six days—led by the appreciating dollar.

Gold ETFs like the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) followed the price trajectory of gold prices yesterday and fell at the close of trade. The VanEck Vectors Gold Miners ETF (GDX) also declined by 3.61% on May 19.

The decline in gold prices impacts gold producing companies like Yamana Gold (AUY), Kinross Gold (KGC), and Newmont Gold (NEM). These companies account for 14.18% of GDX.

The US Dollar Index appreciated against the basket of currencies in yesterday’s trade. The US Dollar Index consists of six major world currencies. These currencies are the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc. The US Dollar Index increased by 0.16% on Tuesday’s trade.

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The appreciating dollar makes the dollar denominated gold expensive. This results in a decline in gold demand—in turn, prices drop. The dollar appreciated against the euro on the consensus of QE (quantitative easing) from the Eurozone in order to boost inflation and strengthen the economy. US housing starts hit a seven-year high—compared to previous month. This also supported the US dollar rally.

The Indian government is planning to tap Indian household gold. This measure will curb gold’s import demand and affect gold prices. Yesterday, the gold demand in India also dropped due to the appreciating dollar.

June gold futures declined for the sixth time in the last ten trading sessions. Gold prices increased by 0.50% more on the average up days than on the average down days, over the same period. Gold futures had an average performance across all of the commodities on Tuesday’s trade. Prices gained just over 2% YTD (year-to-date)—led by improving demand from India.

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