18.06.201403:12:07UTC+00High inflation push gold prices down

On the back of the most recent data on consumer prices in the US, future contracts for gold have gone down in price even with turmoil present in many parts of the globe.

August contracts in the New York Mercantile Exchange for a troy ounce of the precious metal dropped to $1,272 on Tuesday reflecting a 0.3% decrease. The decline happened amidst the crisis happening around the world including the Ukraine-Russia stand off and the continued march of Islamist insurgents closer toward Baghdad.

Gold prices were originally on the rise due to the perceived instability that these crisis cause, emphasizing its role as a safety insurance whenever investors feel unsure of the market direction. It was given an additional boost when an explosion rocked a gas pipeline in Ukraine after Russia announced it will no longer supply the fuel to their neighbor and dispute partner.

This drop in gold that followed its rally could signify how investors’ confidence towards it in the long term are waning as the recovery in the US resumes after an abysmal first quarter brought on by severe winter conditions. An improved economy in the US lessens the need to utilize gold and the conditions present in the market today indicate that just might be the case for the rest of the year.

A bigger player in the price change, however, is the release of data regarding changes in consumer prices in the world’s largest economy. The data showed that prices in May increased the most in over a year providing more flexibility to the Federal Reserve to not hurry interest rate  hikes that could affect gold prices. The Fed meeting to discuss the rates is currently ongoing and a release to tell of the central bank’s decision is expected out this week.