Gold drops on stronger dollar

The US dollar gained on the euro after Fed chairman Ben Bernanke said the risk of a substantial downturn in the US economy had diminished and Treasury Secretary Henry Paulson said that he would never rule out currency intervention. As a consequence of stronger dollar, gold prices have been getting lower, mainly as gold has been seen as a hedge against inflation and weaker dollar.

Oil has also affected the price of gold and with oil now starting to fluctuate in the price, gold has lost some of its strength. Different from oil, gold has also seen a sharp drop in consumption and retail demand has gone down. This has also pulled some of the support from under the price of late. Gold is now believed to be in surplus of around 139 metric tons.