‘Biggest buy’ of 2018 on Wall Street as ‘Gold’ futures fall $5.20 to $3.85
The price of gold has dropped to its lowest level in more than six months after the US Federal Reserve announced a stimulus plan, and investors are now taking a more cautious approach to buying the metal.
Gold futures on the New York Mercantile Exchange, or NYMEX, have been losing ground against the dollar for months, falling as much as $5 to $2.80 on Friday after the Fed announced a $85 billion stimulus package for the economy.
The move is likely to be seen as a sign of confidence that the US economy will bounce back from the Great Recession, which ended in December 2009.
Investors are betting that the Federal Reserve’s new plan will not only help boost economic growth but also provide a boost to the global economy, which has struggled with the fallout of the Great Depression.
In a statement, the Fed said it expects to spend another $85bn on economic stimulus over the next two years, including a $1.5bn boost to unemployment benefits and $1bn to help small businesses hire.
The Fed said in its announcement that it will “provide the additional $85.5 billion through the Federal Open Market Committee’s monthly benchmark purchases of Treasury bills and mortgage-backed securities.
These purchases will enable the Federal funds rate to remain near its December 2016 level of 1 percent.”
But the price of the precious metal has fallen by more than $5 per ounce since the Fed’s announcement, falling to $1,085 per barrel from $1 at the start of the year.
“The decline is particularly worrisome as we are now in the middle of a historic period of rising gold prices,” said Paul Newman, chief market strategist at BMO Capital Markets.
“There has been a big shift to a commodity based mindset on Wall St. This is a massive asset class that is under pressure, and a lot of it is based on commodity prices, not just gold prices.”
Gold futures fell to $16.95 an ounce on Friday, its lowest price since May 19.
Gold prices have also been sliding in other parts of the world, including in Asia, where they have slumped more than 80 percent since January, and the euro has plunged almost 20 percent.
The US dollar rose 0.2 percent to 106.8 yen US$1.34 per US$0.98 in early trade on Friday.
Gold rose about 2.5 percent on Friday to $19,100 an ounce.