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Gold price falls below $1,200 an ounce Gold price falls below $1,200 an ounce
(31 minutes later)
Gold has fallen below $1,200, its lowest level in three years, after the US Federal Reserve said it will wind down its stimulus programme. Gold has continued its drop, falling to its lowest level in almost three years, after the US Federal Reserve said it would wind down its stimulus programme.
Gold fell to $1,191.21 an ounce in Asia trade, breaching the $1,200 mark for the first time since August 2010. Gold fell to $1,191.21 an ounce in Asia trade, after breaching the $1,200 mark in New York on Thursday for the first time since August 2010.
Fed chairman Ben Bernanke last week said bond purchases will start to 'taper off' later this year as the economy recovers. The US Fed said last week that its bond purchases would start to "taper off" in coming months as the economy recovers.
Analysts said investors had been anticipating further price falls.Analysts said investors had been anticipating further price falls.
As a result there was a sell-off, resulting in a big drop in prices in recent days. Some expect the precious commodity to fall as low as $1,000. As a result there was a sell-off, resulting in a big drop in prices in recent days.
"You don't want to catch a falling knife, so people who might be buyers are stepping aside and don't want to show gold at their quarter-end statement," said Axel Merk, chief investment officer at Merk Funds."You don't want to catch a falling knife, so people who might be buyers are stepping aside and don't want to show gold at their quarter-end statement," said Axel Merk, chief investment officer at Merk Funds.
Gold, which is generally considered a safe haven, has been hit by anticipation interest rates will rise. Losing its lustre?
Mr Bernanke last week indicated that the Fed will begin to end its $85bn-a month bond purchases, which are designed to lower long-term interest rates. Gold prices have had a remarkable run over the past few years, driven by two key factors.
Markets saw a dramatic sell-off over the past week after Mr Bernanke said that the central bank could begin paring its bond purchases by the end of 2013 and wind them down completely by the middle of 2014. The first has been the uncertainty surrounding the global economic situation after the global financial crisis and the sovereign debt problems in the eurozone.
That saw many investors turn to gold - seen as a traditional safe haven asset in times of uncertainty.
At the same time, the slowdown in the global economy, prompted central banks across the world to lower interest rates - to historic lows in many cases - in an attempt to try to boost growth.
Analysts said that with interest rates so low, investors have been favouring gold.
However, things have started to change in the past few months.
The US economy has been recovering; as a result, the Fed Chairman Ben Bernanke has said that the US central bank will scale back its $85bn a month bond buying programme.
Analysts said that such a move may see interest rates rise again - making gold a less attractive option.
At the same time, the risks surrounding the eurozone crisis seem to have abated as well, which has also hurt gold prices.
"Gold's major attribute as a potential hedge against a major global crisis has been diluted," Mark Matthews of Julius Baer told the BBC.
Mr Matthews said that given these factors the gold price may fall further.