Gold Tumbles to Below $1500 an Ounce
On Friday, the price of gold fell sharply for the first time since 2011, to below the $ 1,500 mark. Analysts are talking about a stunning price decline while the market is debating the cause for the decline. Germany’s Handelsblatt reports.
New York. On Friday, the price of gold has lost more than five percent of its value. For the first time since July 2011, the precious metal fell under the $ 1,500 mark. With a drop of six percent, it was the largest weekly loss for gold since December 2011. At the close, gold was only trading at $ 1,478 per troy ounce.
Sales accelerated on Friday after unexpectedly poor retail sales data from the United States. The stock market and the price of gold both declined while the price of the dollar increased against competing currencies.
Once again, rumors about a possible sale of Cyprus’ national central bank gold were weighing heavily on the markets. The euro country may be facing a sale of its gold reserves. According to the World Gold Council, its central bank manages 13.9 tons of gold.
The decision about gold sales would be taken by the central bank, said Mario Draghi, President of the European Central Bank on Friday, after a meeting of euro finance ministers in Dublin.
“The level of sales was absolutely stunning. There was no support from below, the price dropped like a knife through butter,” commented Robin Bhar, an analyst at Societe Generale, on the price decline.
After the sharp fall on Friday, the price of gold is now trading around 23 percent below its all-time high. In September 2011, the price of gold had reached its record high of $1,920.30.
Was that it with the twelve-year Gold Rally? This very issue is still highly controversial on the markets. So are the possible reasons for the decline in prices. On one hand, some refer to possible gold sales by the Central Bank of Cyprus, on the other there is the issue of a strengthened dollar fueled by attractive US economic prospects. This last argument seems the least sound, given the recent poor economic data.
Others still justify the rush to sell gold by the central banks’ loose money policy. Central banks always seem to provide market support during tough economic times. The Fed, the ECB and the Bank of Japan provide a safety net – so why still buy gold as a “safe haven”?
The flood of money coming from the central bank raises some investors’ fear of inflation however. Hence, there are arguments for gold as well as against it. Which course the precious metal ultimately takes remains a nail biter.