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Updated 21:54 23/10/20

Demand soars as gold falls to three-week low

By Samuel Gee, News Editor

19 May 2016

Gold fell to a three-week low this morning after plummeting nearly 4.5% (-£40/ oz t) since Monday. The rising value of both the pound and the dollar have contributed to the drop in the gold price, as news from Britain and USA increased confidence in their respective currencies. The silver price has also fallen by 4.8% (-£0.57/ oz t) in the last week.

Minutes from the Federal Reserve meeting last month revealed an intention to raise interest rates, perhaps as early as June this year. This is the first time that the possibility has been seriously explored since the Fed implemented a 0.25% increase in December that had an adverse impact on the US economy. Higher borrowing costs, if implemented responsibly, are interpreted as a potential boost for the economy and news that increased rates are on the cards have seen the dollar rise to a near one-month high, devaluing gold.

Further downward pressure was placed on the precious metal as the pound rose by 1% against the euro after a recent IPSOS MORI poll demonstrated a growing likeliness that Britain may remain in the EU. Rightly or wrongly, there is a strong belief amongst many that the British economy could suffer from a potential ‘Brexit’ and as a result the pound has suffered since the start of the year. Throughout 2016 the value of the pound has fluctuated according to the momentum in the Brexit campaign and the latest indication of loyalty to the Union has acted as a huge boost to sterling.

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