Safe-haven demand for gold has diminished


Last week, gold recorded one of its largest weekly drops, as a rising dollar lured investors’ appetite. The reports of hedge funds unwinding their long positions, supposedly to cover losses made from the global rout in equities, also contributed to the yellow metal’s slide.

A consecutive weekly loss has gold price falling for three weeks in a row. All together, the yellow metal declined around 8% to a seven – week low.

Currently, the safe – haven demand for gold has diminished as we see stocks and gold decline side – by – side. “Many may well be and some already have been liquidating their gold positions to cover their losses in other sectors, putting downward pressure on Gold Prices,” says a note from Swiss precious metals group MKS.

There may be a slight positive boost seen from the ongoing Eurozone debt crisis, especially as late Friday in London rumours were circulating about a possible default from Greece.

The gold:silver ratio has spiked above 45 this week, reaching a value of around 48. This means gold has yet again outperformed silver, which has suffered the largest weekly drop in around 30 years.

Despite all this, gold remains up around 20% on the year, the recent volatility makes it hard to predict a bottom, but most analysts agree that one will appear in the coming weeks.


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