Gold price is highly correlated to inflation and uncertainty in the world. Recently gold prices had been on the rise with the recent events in the world. But there is more news that might affect gold prices. FED has kept interest rates low rather very low close to zero for a few years now in order to help economic recovery. Now it is being reported that James Bullard, Chairman of the Federal Reserve Board of St. Loius has hinted that he believes the US economy to have strengthened enough to warrant an increase in the short term interest rates by the first quarter of 2015.
This is what he said: “I’m starting to think the economy could tolerate at least a little bit of the central bank getting back to a more normal stance … Inflation is picking up now. It is still below target but it has been moving up in recent months … I don’t think financial markets have internalized how close we are to our ultimate goals, and I don’t think the FOMC has internalized how close we are.” This statement will be taken be the investors as a short term negative for gold.