The US gold bullion price as tracked by our MetalMiner IndX has fallen to a record low for this month’s MMI reading — $1,064.50 per ounce — the lowest we’ve seen since the Monthly MMI series began in January 2012.
Indeed, as we reported on MetalMiner’s digital pages earlier this week, gold officially hit $1,054 per ounce – a five-year low. That price hasn’t been seen since February 2010.
Gold prices —which also fell in China, Japan and India as tracked by the MetalMiner IndX — are the obvious persona non-grata (as far as investors are concerned) in this month’s Global Precious MMI slip, itself a record low at a reading of 68, down 11.7% from 77 in November.
US Dollar to Blame
The No. 1 driver forcing gold into the Hadean depths of price charts everywhere is the strength of the greenback. As my colleague and metals procurement specialist Raul de Frutos commented earlier this week, “there’s no question” that the dollar is wreaking havoc on gold price — just check out this visual:
Gold sinks (yellow) as dollar surges (green) simultaneously. Source: MetalMiner analysis of @StockCharts.com data.
So what’s next?
Watch the Fed
“Experts forecast a 78% likelihood the Fed would raise rates in December,” Raul writes. “An interest rate hike could (but not necessarily) boost the dollar even higher as it would add more market conviction that the domestic economy is doing well, or at least better than most major economies, which is good for the dollar.”
“Also, if the Fed raises rates, higher borrowing costs domestically would make the dollar more attractive to yield-seeking investors,” he continued.
What does that mean for future gold prices? According to Raul, many signs point to a continued gold slump.
Dark Horse of this Month’s Index
Adobe Stock/ Björn Wylezich
Amidst all the gold hullabaloo, we’d be remiss not to mention palladium prices. The US bar price in particular fell nearly 20% since last month.
The PGM seems to be succumbing to pressure from lower Chinese demand, especially within the country’s auto market, the biggest in the world. Also, the knock-on effect of lower prices and lower demand is being felt by the likes of Johnson Matthey (L:JMAT). As my colleague and MetalMiner Editor-at-Large Stuart Burns writes, the VW (DE:VOWG_p) scandal has played a major role in JMAT's woes. In the short term, the company’s stock has taken a beating, and in the longer term, look to production of different types of engines — gas, diesel, hybrid/electric — to drive the direction of palladium prices, and the future of companies such as JM.
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by Taras Berezowsky