The gold price continued to fall today, racking up its 5th day off losses as fears subsided over the fate of the European banking system with Deutsche Bank allegedly close to making a deal with the US government.
At 5.13pm (GMT) gold was trading at $1,311 down from $1,316 in yesterday’s trading.
After initially demanding US$14 billion from Germany’s biggest bank by way of penalties linked to its MBS business, which would have seen the bank on the verge of bankruptcy, US regulators have agreed to US 5.4 billion dollar fine, bringing a sense of calm over the markets.
Also weighing on the gold price today is a stronger US dollar boosted by better than expected manufacturing data which increased the chances of a rate hike from the Fed in December.
The purchasing manager's index (PMI) hit the market at 51.5, bouncing back from a number of 49.4 in August.
A number above 50 shows the sector in expansion mode.
"The September PMI release breathes a sigh of relief to growth concerns given the survey's abrupt deterioration in August," said Brittany Baumann, a macro strategist at TD Securities.
"Besides the headline index, which is consistent with its 6m trend, the details were broadly supportive of continued expansion in manufacturing activity and suggests that the August drops were likely a blip." He added.
Speculation surrounding the chance of a rate hike in the US before the end of the year may be just enough to keep gold from building up any steam and rallying much further.
“With investors uncertain on whether the Fed will raise rates this year, there is just enough of a headwind to keep gold prices under pressure,” said Peter Hug, global trading director at Kitco Metals.
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