Gold Prices Hit 11-Month Low

Just when it seemed like gold was about to go on a big run, the yellow metal pulled back to its lowest level since last May.

Gold prices dipped to 1,545 this morning. They’ve dropped 4% since reaching 1,615 an ounce two weeks ago. The reasons for the decline are quite clear.

The U.S. dollar has been soaring of late, rising 5% since the beginning of February. At roughly 83.0, the U.S. Dollar Index is close to a two-year high. Typically, gold prices move inversely to the U.S. dollar, so it’s no surprise that gold is floundering while the dollar is prospering.

A few weeks ago, it appeared that a major gold rally was underway. That’s when Cyprus’ debt problems and bank-deposit proposal came to light, and stocks initially pulled back. When uncertainty hits the market – as it did throughout 2011, when Europe was in the news on a daily basis – investors seek safety by flocking to gold.

With stocks at or near all-time highs right now, investor fear isn’t there. No one is seeking safety from the markets right now. Plus, Europe’s sovereign debt problems are convincing people to abandon the euro for the dollar. That didn’t seem to matter in 2011, however, when the euro was tanking and the price of gold shot up 10%.

In the 15 months since, gold prices have fallen off more than 4%. If you’re a gold investor, that’s not a good trend. Unfortunately, it’s a trend that’s likely to continue as long as the dollar and stocks continue to flourish.

To top