NEW YORK (TheStreet) — Gold prices were volatile Wednesday on fears about China’s lending policies.
A stronger dollar makes dollar based commodities more expensive to buy in other currencies, which results in weaker investment demand and lower prices. However, in general investors are shying away from riskier assets on fears that China will restrict lending. On Tuesday, Chinese banks were required to raise their reserve ratio by 50 basis points igniting fears that the country would curb lending even further.
Also weighing on investors’ risk appetite are worries over Ben Bernanke’s nomination approval as well as President Obama’s so-called war on banks. Investors will look to the Federal Reserve’s interest rate decision due out this afternoon. Although rates are expected to remain unchanged, investors will look for clues for a sooner than expected interest rate hike.