Why is the gold price going down in November 2014?

economy : Why-is-the-gold-price-going-down-in-November-2014 -1

Answer by Balaji Viswanathan:

1. Oil price is going down:

Historically, one gram of gold bought about 75 liters of crude oil. This is an average over nearly a century. Crude oil prices are significantly down in the past 30 days and now costs about Rs.30/liter. Multiply that by 75 and based on this metric you can find a gram of gold should roughly cost Rs.2250 [30 * 75]. It is around Rs.2500 at the time of this writing and thus could go someway down, if the oil continues to stay low.

[The bottom chart is in barrels and ounces, but the content is the same].

2. Inflation fears are gone.

US is not expected to reduce interest rates or increase money supply. Rather it is expected to start toughening up its money supply. In India and other countries too the inflation is quite manageable. Gold goes up mainly when inflation fears go up.
Fed Ends QE, Perks Up Labor Market Outlook

3. Stock and housing markets are doing well

US stock markets are at an historic high and the housing markets have also recovered quite well. That means investors are back to playing their old game, instead of messing around with the yellow metal. In the period since 2008 plenty of stock and real estate investors got too afraid of playing in their markets and started hoarding up gold. They are now selling off.
No. 1 gold ETF sees biggest monthly outflow this year in October

All in all, things are not really looking good for gold.

Why is the gold price going down in November 2014?


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