Why the Price of Gold Has Begun Decreasing

BinaryOptionsNow | Published on September 25, 2011 at 8:12 am

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BinaryOptionsNow – The price of an ounce of Gold dropped by more than $100 on Friday in response to the skyrocketing US dollar and rumors of the liquidation of positions held by large hedge funds.

The fear of a recession and the worsening of the Greek crisis prompted investors to consider precious metals like any other commodity. The “safe haven” situation that benefited the gold this year has suddenly disappeared in the last two weeks.

In two days, gold has lost nearly 9% and, conversely, silver is up 25%. Despite its recent decline, gold had reached a record high of $1,920 per ounce earlier this month and it remains up 16% from its price at the beginning of the year.

At the end of Friday’s session, the spot price of gold was down 5.5% to $1,641 an ounce, that is to say a never-before-seen fall of $127 in one day – the biggest drop in value since the 2008 financial crisis.

Traders explained the rapid drop in gold’s price to panic sales made by investors increasingly nervous about the turmoil in the credit market and seeking to cover losses on other asset classes, particularly stock options.

Analysts say investors might monitor developments in the global economy to see which way things are headed before returning to gold.

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