Gold prices have now moved down by $200 a troy ounce since Tuesday’s record high as appetite for the precious metal has dampened ahead of the much anticipated central bankers meeting at Jackson Hole tomorrow. The focus is now on Federal Reserve Chairman Ben Bernanke’s speech to see if he will signal further quantitative easing.
If there is more easing, gold prices will rise because QE3 will result in flooding the system with more dollars, effectively printing more money, consequently weakening the dollar.
At the beginning of the week, many investors were betting for Bernanke to signal more easing, but as the week progresses, the consensus has shifted to the opposite side.
Gold’s decline was accelerated after margins on gold futures were raised by 27 percent late on Wednesday by the CME. This is the second increase in a month and the biggest hike in more than two and a half years.
Spot gold was down to $1,704 by 14:00 GMT, having dipped earlier to $1,724 from the day high of $1,766.
Gold prices have risen by over 20 percent this year and are well above the moving averages, so prices were well over due for a correction as technicals show that the metal is in overbought territory.