Gold Prices Slide on Stronger Dollar

London (Aug 19)  It's been a tough year so far for gold. The yellow metal has dropped about $250 an ounce since the beginning of the year, or about 10%. Gold last closed above $1,300 in mid-June and settled Friday at about $1,192, a level last seen in January of 2017.

In recent days, the debt troubles in Turkey, which has piled up external debt in foreign currencies, has brought home the impact a strong dollar has on emerging economies. Turkey financed its long run of economic growth by borrowing in dollars and other foreign currencies. Now that the dollar is gaining strength, it is more expensive for Turkey to pay back the loans.

Generalizing from Turkey’s current experience, the U.S. dollar tends to rally as a safe-haven option when there is bad news about trade. And there’s been plenty of that going around in the past several months.

Equities have been moving mostly in the opposite direction of the dollar, with share prices rising when the dollar is weak and falling when the dollar is strong.

BusinessNews

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