Traders bewildered as price of gold plummets
Traders saw a further fall in the price of gold as the traditional safe haven in times of economic turmoil continued its surprise descent.
The precious metal is down by more than $300 per ounce in the last three weeks, from a record peak of $1,921 an ounce on September 6 to less than $1,600 yesterday. Experts are at odds as to why gold prices have fallen, with some citing a drop in global price pressures and others saying the commodity has been overbought.
CME Group, the world's largest futures market, has also increased the minimum investment value to cover itself amid market uncertainty. The recent dive in economic confidence should inspire a flight to gold - as the metal tends to outperform other commodities in times of crisis and also acts as a hedge against inflation.
Julian Jessop, chief global economist at Capital Economics, said two of the pillars that supported investors' confidence in gold have been "knocked away" - namely fears of a surge in inflation and a collapse in the US dollar.
He said: "The more general return of confidence in the dollar has reduced demand for gold as a hedge against a collapse in the US currency."