By Cecilia Jamasmie
Gold hit a three-week low in early US trading Wednesday as the dollar climbed to a four-month high following strong economic data, which raised expectations that the Federal Reserve may raise rates before the end of the year.
Spot gold was last down $14.44 an ounce to $1,317.86 after falling earlier 1.12% to $1,316.71.
The yellow metal has climbed 25% so far in 2016, after having the best first half of a year in four decades. Prices were further helped later by Britain's decision to exit the European Union, pushing gold to its highest price since March 2014 at $1,374.71.
While gold lovers believe prices will only go higher from here, others say a rally will only last if central-bank actions boost inflation, which has historically been positive for the yellow metal. Higher rates lift the opportunity cost of holding non-yielding assets such as bullion, while supporting the dollar, in which gold is priced.
“The overall trend is up,” Bill Beament, managing director at Northern Star Resources Ltd. (ASX:NST), said on a conference call on Wednesday after the Australian company reported record cash flow, The Sydney Morning Herald reported. He said he believed the US presidential election will be the next big catalyst for prices, and that will have more of an impact than the U.K. referendum.
But others argue that a sustained rally may require current geopolitical tension and economic worries to stay in place.