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Updated 10:08 16/05/21

Gold drops as Fed indicate a potential rate hike

By Adam Pike, News Editor

30 Apr 2015

The gold price retreated over $10 per ounce yesterday but managed to stay above the psychological $1,200 barrier.

The gold price dropped after the U.S. Fed indicated they are likely to increase interest rates in the second half of 2015.

The gold price has been boosted in recent weeks following weak economic data out of the U.S. Yesterday data confirmed U.S. GDP grow an annual rate of 0.2%.

The U.S dollar fell following the announcements and now trades at a two month low against a basket of major currencies. A lower dollar makes bullion cheap in other currencies.

The Fed’s interest rate policy seems confusing, and it appears the Fed is trapped. On one hand if they raise interest rates the cost of servicing the government debt pile would rise and the dollar could strength hurting exports. On the other hand if they don’t raise rates the market could lose faith in the Feds ability to normalise rates and manage the economy.

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