The US Federal Reserve plans to raise interest rates this year on the back of an improving American economy, and that is taking the shine off gold.
Why? Because gold is a store of wealth for investors, but generates no returns from regular interest payments or dividend income. Investors have been happy to park their money in gold over the past six years while returns from other 'safe haven' assets have remained low and the economic backdrop has remained volatile. But, with borrowing costs set to rise, commodities, such as gold, are losing favor with investors, as higher returns can start to be generated elsewhere.