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Gold price falls below $1,200 an ounce | Gold price falls below $1,200 an ounce |
(about 4 hours later) | |
Gold has continued its drop, falling to its lowest level in almost three years, after the US Federal Reserve said it could wind down its stimulus programme. | |
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. | 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. |
The US Fed said last week that its bond purchases would start to "taper off" in coming months if 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. | 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. |
Losing its lustre? | Losing its lustre? |
Gold prices have had a remarkable run over the past few years, driven by two key factors. | Gold prices have had a remarkable run over the past few years, driven by two key factors. |
The first has been the uncertainty surrounding the global economic situation after the global financial crisis and the sovereign debt problems in the eurozone. | 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. | 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. | 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. | Analysts said that with interest rates so low, investors have been favouring gold. |
However, things have started to change in the past few months. | 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. | 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. | 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. | 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. | "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. | Mr Matthews said that given these factors the gold price may fall further. |