Gold price touches 6-month low as currency war talk heats up
Spot gold dropped through the $1,650 support level on Monday, slumping close to $18 or over 1.1% to end the day at $1,648.20, a five-week low.
Earlier in the day the gold price touched $1,645.40, a level last seen in August 2012.
Gold is coming off a 12-year winning streak after a 7% annual gain in 2012, but has now fallen 4% below its price this time last year.
Gold’s latest retreat comes as G20 finance ministers and central bankers meeting in Moscow this week prepare to tackle the prospect of intensifying currency wars.
The G7 most highly industrialized nations – recently most notably Japan – employ ultra-loose monetary policy to become more competitive by devaluing their currencies prompting severe criticism from emerging markets like Brazil.
Fiat currency depreciation increases gold’s allure as a hedge against inflation and status as hard asset capable of storing wealth.
Any action by the developed nations to shore up their currencies could work against this dynamic in the gold market, prompting caution from gold traders.