Gold Price Falls as Turkey President Asserts Control After Failed Coup

London (July 18)  Gold declined with other precious metals as Turkish President Recep Tayyip Erdogan reasserted control after Friday’s failed military coup, arresting thousands of soldiers.

Bullion for immediate delivery fell 0.7 percent to $1,327.64 an ounce by 10:24 a.m. in London, Bloomberg generic pricing shows. Positive U.S. retail sales and inflation data on Friday also raised bets that the Federal Reserve will lift borrowing costs this year.

"Gold is declining on a combination of factors, namely on the back of the stabilization of the situation in Turkey and after the U.S. data on Friday indicated the possibility of the rate increase this year," Kirill Chuyko, a BCS Global Markets analyst, said from Moscow.

Higher interest rates hurt gold by improving yields on other assets such as bonds. Even after news of the coup attempt pushed gold higher late Friday, bullion ended last week down 2.1 percent, the first weekly drop in seven, on rates prospects. The odds of the Fed increasing rates by December rose to 44 percent Friday, from 35 percent the day before.

“Better U.S. data on Friday clearly got people starting to think the Fed could actually hike this year,” said Wayne Gordon, executive director for commodities and foreign exchange at UBS AG’s wealth management unit. “It’s not something that the market has priced, but certainly it will be a negative event for gold.”

Some see more gains in gold after a 25 percent rally this year on demand for haven assets amid volatile financial markets and concern over growth. Gold is in a major bull market and may surge to more than $1,500 as low borrowing costs buoy demand and the U.S. election looms, according to DBS Group Holdings.

Souce: Bloomberg