GOLD PRICES extended their fall on Tuesday morning in London as the Dollar continued to rise amid speculation of potential new Fed chief and continuing geopolitical tensions in the Middle East and the Korean peninsula, writes Steffen Grosshauser at BullionVault.
Gold slid to $1288 after touching a 3-week high in the previous session before falling through the key level of $1300 per ounce.
Silver tracked gold and dropped to $17.08 per ounce after it had already started falling from a 1-month high at $17.46 on Monday.
Meanwhile, the US Dollar climbed further after a report that US President Donald Trump may appoint the hawkish Stanford University economist John Taylor as the next Fed chair. Trump will meet the current incumbent Janet Yellen on Thursday to discuss her position.
"Gold prices fell on signs of resilience in the US economy, supporting the case for continued rate hikes," according to a note by Australia and New Zealand Bank Group ANZ.
"A lot of the price drivers that are clouding gold prices are really geopolitical tensions rather than fundamentals," added Barnabas Gan, analyst at Singapore-listed bank OCBC.
North Korean envoy, Kim In-ryong, warned the general UN assembly that the situation on the Korean peninsula "has reached the touch-and-go point and a nuclear war may break out any moment".
At the same time in the Middle East, Iraqi government forces seized the northern city of Kirkuk from Kurdish forces - an oil-rich province claimed by both the Kurds and the central government. The Iraqi government denounced the controversial Kurdish independence referendum 3 weeks ago as unconstitutional. Unconfirmed reports claimed that Kurdish operators briefly halted oil output of around 350,000 barrels per day, oil prices remained near this month's high on the back of concerns about future supply.
Inflation in the United Kingdom rose in September to its highest level since April 2012, according to data from the UK Office for National Statistics. The rise of 3% versus the same time a year ago makes it more likely for the Bank of England to raise interest rates at its next meeting in November.
The pound's fall since last year's Brexit referendum is seen as the main driver for the rising inflation. UK Prime Minister Theresa May travelled to Brussels yesterday to meet with European Commission chief Jean-Claude Juncker in an attempt to break the deadlock over Brexit talks.
Over in India the festival of Dhanteras takes place today. Dhanteras is an auspicious day for gold and silver purchases in the Hindu calendar and is the start of the festival of lights, Diwali, which takes place this Thursday.
The Indian demand for gold dropped after demonetisation in November 2016, followed by the implementation of the Goods and Service Tax (GST) in July 2017 and the decision this August for gold jewellery trades to fall under the Prevention of Monetary Laundering Act and the Know-Your-Customer (KYC) rule to crack down on the black market.
But after the government reversed its latest mandate and hence freed potential buyers from the requirement to provide their tax identity for purchases over 50,000 rupees (around $770), jewellers were now expecting a 10-15% increase in purchase of gold jewellery compared to last year, said Saurabh Gadgil, Director at the Indian Bullion Jewellers' Association.
Jewellers in Mumbai have also come up with offers such as discounts and even free mobiles and washing machines to further boost sales, after last year saw the smallest Indian household demand since 2009.