Gold price drops sharply on US economy hopes

Forex Gold Index(pm fix) $/oz

Last Updated at 28 Aug 2014, 10:00 ET Gold twelve month chart
price change %
1292.00 +
+9.25
+
+0.72

The price of gold has plunged 9.3%, after hitting a record $1,913.50 an ounce on Tuesday, as markets became more upbeat about the economy.

By late trading in Asia on Thursday, the precious metal had dropped to $1,738, while stock markets continued to rally.

Analysts put the falls down to profit-taking and hope of new measures in the US to try to bolster its recovery.

Gold is perceived as a safe investment in times of uncertainty.

Its price has risen steadily this month during a tumultuous period on the markets caused by fears about the global recovery and euro debt crisis.

Some predict that Federal Reserve chief Ben Bernanke will signal a new round of quantitative easing (QE) to try to kick start the US's sluggish economy when he speaks at a gathering of central bankers on Friday.

They say that hopes of a healthier US economy make gold less attractive as a haven investment.

However, QE was also previously cited by other analysts to explain the jump in the gold price to a record high on Tuesday.

According to their line of thinking, investors assume that QE - in which the central bank injects new money into the economy - could depress the value of the dollar, making gold a more attractive investment.

The bullish sentiment, which saw European and US stock markets rise on Wednesday, spilled over into Thursday trading in Asia, with Japan's Nikkei ending the day 2% higher and Hong Kong's Hang Seng up 1.1%.

Stronger-than-expected US durable goods data, a leading economic indicator, could also have helped shares. The latest figures showed that companies ordered more big ticket items such as cars and planes in July.

More on This Story

Global Economy

More Business stories

RSS

Features

  • A painting of the White House on fire by Tom FreemanFinders keepers

    The odd objects looted by the British from Washington in 1814


  • Chris and Regina Catrambone with their daughter Maria LuisaSOS

    The millionaires who rescue people at sea


  • Plane7 days quiz

    What unusual offence got a Frenchman thrown off a plane?


  • Children testing a bridge at a model-making summer school in Crawley, West SussexSeeding science Watch

    The retired professor who turned village children into engineers


  • Krouwa Erick, the doctor in Sipilou town at the border of Ivory Coast and Guinea - 27 August 2014Bad trip

    The Ebola journey no-one in Ivory Coast wants to take


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.