The gold price dropped significantly on Monday (August 5) as global markets faced volatility, sinking as low as the US$2,375 per ounce mark after closing the previous week around US$2,440.
The central bank also left the door open to further increases in 2024, depending on economic conditions.
Japan’s years of near-zero rates have made it a popular destination to borrow money, and investors have been able to use those funds to make gains in lucrative areas — for example, US tech stocks. While that might sound like a simple way to profit, carry trades tend to involve high amounts of leverage, making them potentially very risky.
That risk element is what played out this week — the value of the Japanese yen was already on the rise ahead of the Bank of Japan’s rate hike, and that boost pushed it even higher, spooking those involved in carry trades around the world.
Gold was back above US$2,400 as the week drew to a close.
Here’s how he explained it:
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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