Gold tumbles as euro drops below 130

The price of gold tumbled last week as the euro traded below 1.30 for the first time since January. Gold reached a record high of $1929.15 in September and has dropped 18% from the peak. A decline to $1,536 would be a 20% price drop, which economists generally consider confirmation of a bear market. There are numerous explanations for the drop in price of gold.
The first, strengthening of, and safe haven demand, for the US dollar on fears of a collapse of the EU. Despite a 15 trillion US government debt, the US dollar is rising and demand for US treasuries is strong. These assets present significant competition to gold’s safe haven status. Some argue that the decline reflects technical selling sparked by a drop below the 200 day moving average at $1614. This is the first time gold dropped below this average since January of 2009 and the break is a strong technical sell signal.
In addition, some argue that gold has lost its attraction because of the increased risk of global recession. As the global economy slows, demand for gold from India and China, the world’s largest gold buyers, will drop. A more ominous explanation is European banks are selling gold to raise cash, fearing  possible EU defaults and hedge funds are selling to meet margin calls because of recent weakness in commodity and equity prices.
Gold has been a primary safe haven in times of global economic and political uncertainty. Conventional wisdom is, if the central banks continue to expand their balance sheets, this aggressive monetary stimulus will lead to a debasing of currencies and inflation. Many economists also believe that gold protects wealth in deflationary times.  Austerity measures in the US and EU, the Federal Reserve’s hesitation to implement QE3, the ECB’s reluctance to become the lender of last resort for Europe and slowing global growth could spark a deflationary spiral. Part of gold’s current decline may reflect investor uncertainty if gold will continue to be a safe haven if a deflationary spiral emerges.
Gold remains the top commodity pick for 2012 and most factors that sent gold higher in 2011 are not going away. The uncertainty investors face in 2012 will likely contribute to gold’s outperformance against other asset classes next year. Gold is set for its 11th consecutive year of gains and as investors look for wealth protection from weak currencies, falling equities and rising inflation gold could soon resume its rise.

Fuente: http://blog.easy-forex.com/