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A Race To The Bottom For Gold

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Editor’s remarks:
Last week gold shed 5% of its value, its sharpest decline in 3 years. The principal theme driving the price instability is the upcoming Fed decisions about a change in interest rates which is gathering steam. The market is now convinced that November or December will see an increase in interest rates, and consequently see other yield-bearing assets become more attractive, resulting in a rise in the value of the US dollar. Over the course of a poor 2016, $27bn has flowed into gold-backed exchange traded funds this year alone, and while gold may seem a stable and strategic hedge it is too vulnerable to shocks and changes in the global economy. Gold it seems will forever be a crisis commodity and should see a terrible few months on the Fed’s and US’s continuing good news. However, gold rose marginally by 0.7% on Monday, due to the jump in the price of crude oil after Putin announced that Russia is prepared to cooperate with Saudi Arabia and OPEC on capping production. However, this should not have a lasting effect on the continuous decline of the commodity, especially if OPEC’s deal falls through.

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