Monday Open: $1,360.00
Weekly High: $1,416.50
Weekly Low: $1,331.80
Friday Close: $1,401.00
The gold decline that has been ravaging the market in the past few months, and weeks especially, hit a 2-year low on Monday. From the safe $1,550 to $1,600 range, the yellow metal has been steadily declining, and dropped all the way down to $1,330 this week. This was one of the most devastating and dramatic sell-offs that Wall Street has ever witnessed, and the strange part is that no one is exactly sure why it happened. Ever since gold dropped from its mighty $1,700 position last year, a series of automatic stop-losses has been intermittently bringing the price of gold down. If this drop was due to an automatic price sell-off, it was the biggest one yet.
Other theories as to the price decline include fears of central banks selling off their gold, especially Cyprus, ETF liquidation, global deflation, a strengthening dollar, and other, mysterious hedge funds replacing the safe haven nature of gold. Whatever the cause, or combinations of causes, there were no prominent external factors that contributed to the major price drop that occurred over the weekend and culminated Monday in a sudden 10% decline, more than $200 an ounce. Mostly, analysts attribute the tidal wave of traders exiting the market to “panic selling.” When the price starts to drop, as it did on Friday, hoards of people decide to play the money game safe by protecting their losses.
The rest of the week’s gold news paled in comparison to Monday, and most trading was done simply in recovery from the unexpected price drop. Tuesday regained some strength in short-covering, bargain hunting and a strong demand for physical gold. Since Monday, the price of gold only steadily increased, and a large part of this recovery is due to buyers in Asia, as well as the rest of the world, taking advantage of the low price of gold and buying physical stores in bulk.
The Boston Marathon bombing last week also contributed to already frayed nerves, but by Friday, the day when the one remaining suspect was taken into custody, the price of gold had rebounded to just above $1,400. For all the chaos that occurred on Monday, the gold market had stabilized once again by the end of the week.