The gold price continued to tumble today hitting a 9 month low after yesterday’s interest rate and monetary statement from the US Federal Reserve.
At 6.56pm (GMT) gold was trading at $1,130 down from $1,140 in yesterday’s trading.
The precious metal began falling moments after the Fed raised rates yesterday, but it was the bullish tone of the following monetary speech which accelerated the losses.
The US Central bank now plans to raise rates 3 times instead of the predicted 2, which caught investors by surprise and saw them exit gold for the US dollar.
The greenback is more attractive in times of rising rates as it’s an interest bearing asset, as opposed to gold.
"We feel the 25 basis points increase was almost fully priced in and didn't take market participants by surprise, but the strong market reaction is due to the new Fed projections for 2017, which showed the central bank now expects three rate hikes for 2017 rather than only two factored in by the market in September." noted FXTM chief market strategist Hussein Sayed.
For investors of long positions in gold, the pain may not be over and we can expect further falls,
“The outlook for gold is not great, the more hawkish comments from the Fed is clearly a headwind in the short term” noted ANZ analyst Daniel Hynes.
“The selling seen this morning is just the start of things to come. Certainly the environment is difficult for gold given the appreciation in the dollar”.