Gold Price Falls to Lowest Level in Three and a Half Months
Gold fell 1% on Friday to $3,980.4 an ounce, while silver dropped 3.6%. Analysts point to strong US economic data and rising inflation.
The price of gold slipped 1% on Friday to $3,980.4 per ounce on global markets. Another precious metal, silver, fell more sharply, losing 3.6% to $50.5 per ounce. If the trend holds, gold will post a monthly decline in October for the second month in a row.
What is pushing prices down
Analysts name two factors weighing on gold: the latest US economic growth figures and a rise in inflation in the country.
US gross domestic product (GDP) grew 3.4% in the third quarter of this year compared with the same period a year earlier. That is faster than in the previous quarter, when growth in the world's largest economy was 2.2% in April–June. Economists had expected third-quarter GDP growth of 3%.
Meanwhile, annual inflation in the US rose to 3.7%, up from 3.4% in each of the previous two months. The data have strengthened expectations that the Federal Reserve, the US central bank, could raise its benchmark interest rate in the near term.
Why interest rates matter for gold
Analysts explain that higher interest rates usually make gold less attractive. The metal pays no interest, so interest-bearing investments become comparatively more appealing.
Forecasts for next year
At the same time, experts say gold could climb to $5,000 per ounce next year or even higher. They expect the Fed to have to cut its benchmark rate over time, while inflation will no longer pose a problem for the economy.
