Brighter US credit outlook sends gold price tumbling

The price of August gold fell by as much as $21 an ounce or 1.5% to touch $1,365 an ounce on Tuesday on increasing signs that ultra-loose monetary policy in the US may be coming closer to an end.

Ratings agency Standard & Poor’s lifted its outlook for the credit rating of the US on Monday to stable from negative, citing receding fiscal risks.

The brighter prospects was good news for the dollar and may indicate that the Federal Reserve will start tapering off its QE program to keep interest rates low and flood markets with cheap money.

The Fed's open ended assets purchases at a clip of $85 billion a month hurts the US currency, but a stronger dollar diminishes gold's allure as an inflation hedge and storer of wealth.

By lunchtime gold had recouped some of the day's losses trading at $1,375 an ounce, still a more than two-week low.

 

1 Day Spot Gold Prices - Gold Price Chart