Gold Prices Continue Their Fall
Yesterday represented a modest gain for gold prices, but the boost was short-lived, as today the precious metal has tumbled once more, continuing its weak performance so far in May.
Coming in at $1,218 an ounce, gold has suffered a poor showing this month. The value of the yellow metal has taken hit after hit, with last week being especially damaging, as analysts anticipated an easy victory in the French elections for Emmanuel Macron, who was the preferred choice of the market versus his opponent, Marine Le Pen.
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Macron is a centrist, pro-free trade, and for the euro and the European Union (EU). Le Pen and her National Front party ran as a populist movement opposed to the single market and currency.
Unlike the U.S. election in November 2016, the polls accurately predicted a landslide victory for Macron. Both the anticipation and eventual win of Macron over Le Pen served to crush gold prices, as the safe-haven asset lost some of its luster due to the restored stability in France.
Gold is now nearing its two-month low of approximately $1,200 an ounce.
The commodity was also the victim of an optimistic outlook coming from the U.S. Federal Reserve, which boosted government bonds, the U.S. dollar, and the likelihood of an interest rate hike coming in June. All these are often seen as damaging factors that contributed to the gold price’s downfall in recent weeks.
Gold is often the beneficiary of a weak U.S. economy, dollar, and political instability in general. Analysts seek it out as a risk management investment to stave off potential currency falls or economic troubles.
While, in March and early April, political turmoil helped propel gold to highs not seen since the tail end of the Great Recession, those problems—including potential U.S. military action in Syria and North Korea—have since smoothed out and don’t represent the same risk that they did in previous months.
