Gold prices have sunk 6 per cent from their September high of $1,358 a troy ounce, amid a strengthening dollar and expectations of tax cuts by the Trump administration.
The precious metal faces headwinds from rising interest rates that increase the appeal of other assets to weak physical demand in the largest consuming markets of India and China.
But gold’s fate will probably depend on the timing of global central bank rate rises and the speed of inflation.
The dollar rally could lose steam if other central banks increase interest rates. In addition, it is still uncertain whether US president Donald Trump can get his tax cuts through Congress, which could delay a US economic recovery.
Gold is still up 11 per cent year-to-date and seems to have found a floor, inching back up to $1,276 a troy ounce this week.
For the gold bugs, gold is still a hedge against financial risk and record high equity markets spell trouble.
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