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Gold Price Declines Again, Gold Currently Trading More As Risky Asset Than Safe Haven
by Hal Young
May 11, 2012 – The gold price declined once again today to a brand new four month low of $1,571 an ounce. This was mostly due to another upside attempt on the dollar as worries over the financial health of Greece and Spain and huge trading losses for JPMorgan hurt stock markets and the euro which prompted investors to seek refuge in the dollar.
Of course the big question on most minds is will this downward movement of late run out of steam soon? ”We are moving into an area of support with many talking about 1,550 as the line in the sand. The dollar should by now have been a lot stronger considering the strong buy signal given this week in the EUR/USD. This has so far not materialized,” Saxo Bank VP Ole Hansen said.
Yesterday the gold price did briefly break a three day losing streak by rising to over $1,600 per ounce. That didn’t last long however and the spot price closed at $1,594. Silver didn’t fair much better, it started positive but closed at its lowest levels, $29 an ounce, since January.
Gold shares held steady along side the gold price, Market Vectors Gold Miners ETF (GDX) was up by $0.07 at $43.09 per share while Barrick Gold (ABX) rose 0.4% to $37.77 per share. However Goldcorp (GG) slid 0.7% to $35.36 per share.
“Gold seems to be currently trading more as a risky asset than a safe haven,” comments Anne-Laure Tremblay, precious metals strategist of BNP Paribas. “While the U.S. dollar has gained on the back of higher risk aversion, gold was sold off. The decline is likely a consequence of liquidation in the paper market rather than lack of interest on the physical side.”
India’s demand of physical gold has also been low as of late due to a weakened rupee. This has further eroded confidence of potential investors. ”May is turning into a trouble month for investors in most asset classes once again. Gold, offering high liquidity, is being hurt by the need to realize cash and move to the sidelines,” Saxo Bank VP Ole Hansen said.
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