Gold and corresponding SPDR Gold Trust (ETF) (NYSEARCA:GLD) prices are feeling the pressure of improving investor sentiment over the health of the global economy. The fresh impact on gold prices seen today during European trading can be traced back to the decision by the European Central Bank (ECB) to hold interest rates steady rather than lower them. The ECB also said on Thursday that the European markets shows encouraging resilience against Brexit aftershocks.
Gold futures for August delivery were seen falling nearly 0.50% during morning trading in Europe. The morning also saw gold prices hitting a low of $1,322.00 per troy ounce. On the previous day, gold pulled back 0.89% to trade at $1,331.00.
What’s rattling gold?
Investor fears about global economic catastrophe following the Brexit vote appear to be fading. Sentiments have been lifted by bullish economic data coming from the U.S. this week as well as the past one. U.S. labor, retail and housing data rose in June relative to May, signalling to investors that economic growth was regaining pace.
The bullish data have also increased expectations of at least a single interest rate hike by the Federal Reserve this year. Mixed U.S. economic data had made some investors doubtful about the Fed reviewing interest rates in 2016.
As investor confidence in the U.S. economy improves, the dollar has also gained ground against a basket of global rivals. That has made gold purchases more expensive for investors holding currencies other than the dollar, which explains the decline in the prices of the yellow metal in dollar terms.
The decision by the ECB to maintain the status quo with regards to interest rates and the comment by the boss of the Bank of Japan that helicopter money is not among easing considerations have also hurt gold prices. These events have shown that things are not quite out of control.
Performance of other precious metals
Silver contracts for September delivery were seen up 0.30% to trade at 19.875 a troy ounce. But copper futures appeared to follow gold’s path with copper for September delivery declining to trade at $2.259 a pound.