Gold price meltdown: Key reasons

Know more about the key reasons of current gold meltdown.

Tracking in line with global markets, the yellow metal in Indian markets took a severe knock to hit a 3-1/2-month low and closed below the psychologically important Rs 25,000-mark.

Globally, gold prices slumped to a near-six-year low on Thursday. Spot gold fell to USD 1,045.85 an ounce, the lowest since February 2010 while US gold futures slid to USD 1,045.40, the lowest since October 2009.

Here are the key reasons of gold meltdown:

-Federal Reserve chair Janet Yellen has virtually cemented the case for a US rate hike this month. A rate hike in December, would be the first in nearly a decade. Gold, as a non-interest-paying asset, would not benefit from higher rates.

-Strength in the dollar also pressured the metal. The dollar jumped to its highest in 12-1/2 years against a basket of major currencies on Wednesday. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

-Investors are rapidly pulling out of bullion funds, adding to the pressure on the metal. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 2.41 percent to 639.02 tonnes on Wednesday, the lowest since September 2008.

-Heavy selling from stockist and speculative traders.