Gold prices dip to reveal bargains for the longer term

AUGUST has been a lacklustre month for gold prices. With September's Federal Open Market Committee meeting nearing, investors refocused their attentions on the likelihood of a US interest rate hike. Two consecutive months of strong non-farm payrolls data hinted at improving economic fundamentals. A gain of 271,000 and 275,000 jobs in June and July respectively both surpassed average monthly growth for the year.

Speculation of a rate hike in coming months was further stoked by a series of speeches by Federal Reserve officials. Fed members Stanley Fischer, William Dudley and John Williams took turns talking up interest rate expectations, each signalling in their own words that labour and inflation measures were close to targets.

Markets appeared apprehensive of the hawkish language at first, but finally came round when Janet Yellen backed the hawkish stance at the Jackson Hole symposium.