Why Is Gold Trading at Its Lowest Price Levels in 3 Weeks?



Gold declined to a three-week low

After posting moderate gains for two consecutive trading days, gold was weaker on Wednesday, August 24, and fell to three-week lows. At 2:20 PM EDT on August 24, the COMEX gold futures contract for December delivery was trading at $1,328.25 per ounce, a drop of ~1.3%.

The COMEX silver futures contract for September delivery was trading at ~$18.52 per ounce, a drop of ~2.1%.

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Market awaits Janet Yellen’s speech

The market is anticipating the speech by the Federal Reserve chair, Janet Yellen, at the annual central bankers meeting to be held in Jackson Hole, Wyoming, on August 26. The recent hawkish comments made by Fed officials could increase the chances of an interest rate hike in the near term. The market expects Yellen’s remarks to give hints about the timing of an interest rate hike in 2016.

At the beginning of the week, Stanley Fischer, the vice chair of the Federal Reserve, stated that the US economy is close to reaching its employment and inflation targets. At the end of the previous week, William Dudley, the president of the Federal Reserve Bank of New York, offered his support for the gradual increase in interest rates, preferably sooner rather than later.

These hawkish comments decreased the momentum of gold prices during the week and pushed gold down to its lowest price levels in six weeks. Please read Why Gold Is Closely Tied to Interest Rates to learn why interest rates impact gold prices.

On Wednesday, August 24, the chances of an interest rate hike in September, November, and December stood at 18%, 23.1%, and 48.8%, respectively. At 2:45 PM EDT on August 24, precious metal producers Barrick Gold (ABX), Newmont Mining (NEM), Silver Wheaton (SLW), and Royal Gold (RGLD) fell by ~8.9%, ~7.3%, ~7.4%, and ~7.8%, respectively. The SPDR Gold Trust ETF (GLD) fell by 1.1%.


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