Traditionally a store of value, gold has been a safe haven for savers and investors. But what happens when the prices keep going south? Gold producers and investors alike are becoming uneasy as the global gold prices continue to tumble in the face of the strengthening US dollar.
From its peak in August 2011, gold prices have continued to slide. Compared to average monthly price of $1,755.8 per once for August 2011, the yellow metal has come down to $1222.5 per ounce for October 2014 - a decline of over 30 percent. Its latest price at around $1,148 per ounce is about 40 percent down from its historic high. The global gold prices rally that began post-2008 financial crisis seems to be ending now.
Right now, four factors are the cause of headwinds for the global prices of gold: One, the investors are moving from gold to the firming dollar; second, lower inflation in certain economies and lower crude oil prices making gold less attractive; third, euro zone countries selling gold stocks to repay their debts; fourth, the new wave of impetus out of Japan.
In its latest quarterly report by the World Gold Council, the third quarter of 2014 continued to be a subdued quarter for the gold market. Total global gold demand in the 3QCY14 slipped by 2.4 percent, year-on-year. Gold supply also continued its fall, diving by 7.2 percent year-on-year. Further downward pressure has been added by a decline in the flow of recycled gold.
The predictions for gold prices in the near term are not investor-friendly; with China apparently stocked after record imports last year, and the Indian festival season ending, demand for gold is expected to remain low. As of now, the only most significant sign of hope for the gold producers and the investors is the intended increase in the interest rates by mid-2015 by the US Federal Reserve.
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