The price of gold is down 6% on Oct. 21 following a record-breaking rally in recent months.
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Gold is currently trading at $4,150 per ounce amid its steepest decline since November 2020. Analysts are attributing the drop to investors booking profits and the U.S. dollar rising on expectations for another 25 basis point interest rate cut from the Federal Reserve on Oct. 29.
The pullback in gold comes only a day after the price hit its latest all-time high of $4,381.21, having gained more than 60% this year as geopolitical and economic uncertainty drove individual investors and central banks to ramp up their purchases of bullion.
U.S. Dollar Strength
Investors also shifted capital into gold as the U.S. dollar weakened this year. However, the dollar index is up 0.4% on Oct. 21, making gold more expensive for holders of other currencies. The greenback, as the U.S. dollar is known, could also strengthen with interest rates expected to move lower in coming months.
Another test for gold is likely to come with the release of the U.S. inflation report on Oct. 24. Delayed due to the U.S. government shutdown, the September inflation report is expected to show a 3.1% year-over-year rise in consumer prices. Anything worse than that could send investors running back into the safety of gold, say analysts.
Is the SPDR Gold Shares ETF a Buy?
The SPDR Gold Shares (GLD) exchange-traded fund (ETF) tracks the spot price movements of bullion. Its price has risen 27.54% in the last three months as geopolitical uncertainty and market risks have grown.
