Gold prices volatile to a stronger US dollar as American QE fades away

Price of gold remains volatile to a stronger US dollar and has reduced the number of investors buying safe haven metals over the last few weeks, whilst declining chances of another round of QE (quantitative easing) in America faded away and was not something that gold bulls wanted to hear.

Latest Gold Price

The most actively traded contract, for April delivery, fell $3.70, or 0.2 percent, to settle at $1,655.80 a troy ounce on the Comex division of the NYMEX. Gold finished the last week negative by approximately 3.25 percent overall. Year to date, gold is still up 5 percent.

The ICE US Dollar Index hit a fresh seven week high last Wednesday, also bearish for the precious metals markets, with the index closing off Friday’s session at 80.51.

Many strategists continue to see good prospects for gold in 2012 but one of the few events that could change this outlook, the return of US central bank tightening of monetary policy, attracted some attention this week and caused additional weakness to the price of gold and silver.

US Monetary Policy – QE

The US Federal Reserve unsurprisingly kept monetary policies unchanged at its FOMC meeting but it provided a more optimistic outlook for the US economy, saying that the pace of growth in coming quarters would be stronger than previously expected.

This projection has once again lowered the expectation for additional quantitative easing and raised doubt about whether the Federal Reserve will maintain rates at low levels until 2014 as previously announced in January.

Meanwhile, banking giant Credit Suisse said that investors continue to favor risk over haven instruments like Treasurys, and gold is further hampered by a rally in the US dollar.

“We believe there is room for further falls in the gold price in the short term but having already dropped by more than $70 in three days we are wary of a short covering bounce.” Credit Suisse said.

Original post: 
Gold prices volatile to a stronger US dollar as American QE fades away