Is the gold price headed back to US$1,000 an ounce?

Gold bulls won't like it much, but the odds of the gold price sinking towards US$1,000 an ounce or even lower are growing.

After hitting a high of around US$1,384 an ounce just a few months ago, the gold price has dropped to US$1,260 an ounce, including the biggest weekly fall in more than three years.

And it's all got to do with signs of improvement in the US economy. According to Bloomberg, a resilient jobs market and gains for the service economy have signalled that expansion can continue even if rates rise. It also means there's little need for investors to invest in safe-haven assets like gold.

That means that the US Federal Reserve is widely tipped to raise interest rates this year, reducing gold's attractiveness against other assets like interest-bearing fixed income securities.

A brief rally in the past few days is unlikely to stop the rot, and those bargain buyers are more than likely going to get burnt. Goldman Sachs thinks that gold is a buying opportunity below US$1,250 an ounce, with the metal offering protection against risks to global growth and limits to central bank effectiveness.

But the odds of the US Fed raising rates is growing – there's now a 68% chance of a rate hike this year, from around 20% three months ago.

Gold bulls might want to stand in the face of the oncoming storm, but there seems little doubt that the gold price is going down.

The only question is how far.

Gold has traded as low as ~US$1,050 an ounce in the past year – a six-year low in December 2015 – after the US Fed raised interest rates for the first time since 2006.

Australian-based gold miners still have the luxury of an exchange rate of around 75 US cents, so they will still be making decent margins. But the massive gains gold miners have seen so far this year as the table below shows, could easily evaporate as their share prices plunge.

Source: S&P Global Markets Intelligence

Look out below.