Gold price sinks to near three-year low

[Joe Higashi]

Gold price sinks to near three-year low

By Justine Parker, ABC June 26, 2013, 3:54 pm

The prospect of the US scaling down its stimulus program has left investors worried about the cost of borrowing.

ABC © Enlarge photo

Gold prices have dropped to almost a three-year low after positive news on the American economy increased the chances of an end to the US Federal Reserve's stimulus policies.

Figures released overnight showed US house prices had their biggest rise in seven years, while consumer confidence jumped.

There was also good news on the manufacturing sector.

Spot gold has tumbled more than eight per cent since last week, when Federal Reserve chairman Ben Bernanke outlined a plan to gradually wind back aggressive bond-buying policies.

Around 2.00pm (AEST), it was fetching $US1,249 an ounce.

Analysts from HSBC have downgraded their long term out look for the price of the precious metal.

They now expect the gold price to average at around $US1,435 next year, down from a previous estimate of $US1,600.

In2014, the expect the average price to be $US1,395.

"One support for gold was increased central bank buying, as reserve mangers sought to diversify their foreign exchange reserves," the analysts said in a note.

"These reserves are now either falling or not growing as quickly due to declines in current account balances in many emerging market nations as a consequence of the slowdown."