The reasons why gold and silver fall sharply

Rising Dollar: Gold and Dollar mostly moves in opposite direction. So, if one is heading north, another tends to be in south. Gold is priced in U.S. dollars. Thus, if the U.S. dollar goes up, it becomes expensive for the rest of the nations to buy gold, so the price of the gold instantly goes down; conversely, if the U.S. dollar goes down, the price of gold goes up.

Renewed strength in US dollar recently one of the main reasons behind the fall in gold prices as gold has become pretty expensive to non-US buyers.

Hedge Fund Sell-off: Recently, The NewYork Times reported that some of the world’s biggest hedge funds are the main culprits of this sell-off. Hedge Fund managers who have been piling into gold from past two years thinking that it’s the best bet against inflation or other riskier assets like equities during uncertain times sold gold to raise cash to meet capital demands for their borrowings from Wall Street banks due to the sharp decline in the value of their underlying collateral.

They also sold the metal to meet the redemption requests from investors who fear that 2008 crisis may repeat again seeing the recent market volatility.

They’ve been reducing their exposure in the gold in futures market after its peak in early August.

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Tags: Gold analysis, Gold future prices, Gold futures, Gold investment, Gold news, Gold price, Gold price forecast, gold prices, Silver price, silver prices

Posted by VBN on Sep 25 2011. Filed under Gold. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry