Recently, a stronger dollar, combined with forecasts for low inflation, has put downward pressure on gold. Since gold futures are traded in dollars, a stronger dollar means lower gold prices. The stronger dollar also makes gold more expensive for overseas buyers as the exchange rate makes their native currencies worth fewer dollars.
A half hour after the opening bell in New York, we have gold at $1,717 an ounce, pulling up slightly from yesterday’s trading. The brief fall below the $1700 mark was an important psychological factor in the markets. Looking forward, there doesn’t seem to be any strong influences in the very near future to move gold in either direction. The expected gold consumption for the Indian holiday season may be blunted by the rupee’s weakness against the dollar, making gold more expensive for buyers there. With major quantitative easing seemingly not on the agenda for any of the central banks, inflation is not seen as a problem in the short term.
Silver has climbed slightly to get back above the $32 mark, but will be subject to the same factors as gold.