ISLAMABAD (Kashmir English): Gold has dropped drastically in the international market, once again hitting an all-time low in more than a week as the pressure mounts on gold with the prospect of an increase in interest rates by the US Central Bank.
As per a news organization, the current gold prices fell by 0.3% on the previous Monday. Before this, the price of gold had reached its lowest level in weeks.
It must be noted that on the last Friday, gold prices had also fallen by over three percent, following which the attention of investors was drawn towards the interest rate policy of the US Federal Reserve.
The reason for the fall in gold prices is being linked to the remarks made by US Federal Reserve head Kevin Warsh regarding a tighter financial policy.
He had indicated at Jackson Hole that the Fed would consider additional moves if it is unable to generate sufficient confidence that inflation is heading toward the 2 percent target. Gold, often considered a hedge against inflation, may lose its appeal if interest rates rise, since gold does not pay interest or dividends.
Currently, the market seems to be pricing in the likelihood of a US rate hike in September to be about 60%. However, rising tensions in the Middle East have also impacted financial markets around the world. Prices of oil have risen amid tensions between the United States and Iran, which raises fears of increasing inflation around the world.
Experts warn that if oil prices keep rising, pressure on central banks to raise interest rates may increase, which is not good for gold, as higher interest rates discourage investment in gold.
