Gold drops sharply for second day in a row

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All that glitters is not gold this morning.

With apologies to Led Zeppelin, gold prices are down sharply for the second day in a row.

Last week’s better-than-expected unemployment figures raised the prospect that the Federal Reserve could boost interest rates by the middle of next year, earlier than many people had predicted.

That pushed up the value of the dollar on the notion that rising U.S. interest rates would make Treasury debt and other dollar-denominated securities more attractive.

But given that higher rates would lessen the possibility of inflation, that theoretically reduces the allure of holding gold as an inflation hedge. And some traders who had sold dollars to buy gold are now reversing course.