Gold prices plunge to new 5.5-year low on strong dollar, silver hits 6-year low

Gold prices plunged further, touching a new 5.5-year low on 24 July, while silver closed at a six-year low, as investors continue their selling spree amid a stronger US dollar and increased hopes for a Fed rate increase.

Gold prices closed at $1,085.50 (£700.09, €989.54) per ounce on 24 July, down 0.79% or $8.60, on the Comex division of the New York Mercantile Exchange. This was the lowest close since 10 February 2010.

Taking cues from gold trade, silver plunged to a six-year low at $14.49 per ounce, down 1.45%. Meanwhile, platinum and palladium increased 1.01% and 1.05%, respectively.

Gold prices fell to as low as $1,088.05 an ounce on 20 July – the weakest level since March 2010 – led by a selling spree in China and expectations of an increase in US interest rates.

Prices subsequently recovered as the rapid high-volume trading in the Comex market, which sparked the decline in China, seems to have abated. Nevertheless, analysts were not expecting a significant recovery in prices, given no noticeable short-covering, or follow-through selling.

The latest loss was fuelled by a stronger US dollar, which advanced against other major currencies. Gold is traded in dollars and a rally in the greenback makes purchases expensive for buyers using other currencies.

Gold earlier breached the key support level as the dollar gained following Federal Reserve Chair Janet Yellen's comment that the central bank is on course to raise interest rates if the US economy continues to expand.

The US Fed is expected to increase benchmark interest rates before the end of 2015, and investors in gold are selling as the commodity's appeal as an investment is steadily declining.