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Gold price falls to its lowest amid diminishing inflation

in Afghan Business

Gold price falls to its lowest amid diminishing inflation

gold jpgThe price of gold has fallen 9.1% to USD 1,395 an ounce, its lowest in two years, amid fears that high inflation is to recede.

Some analysts said that the decline may have been triggered by the investors expecting the US central bank to tighten its quantitative easing (QE) program that can take out a lot of trust out of gold.

“What we see in gold is panic selling, perhaps triggered by the Fed’s stimulus view,” said Dominic Schnider, an analyst at UBS Wealth Management.

The fall in gold price coincided with Cyprus’s annoucement that it was planning to sell most of its gold reserves. Other weak Eurozone economies, such as Italy and Spain, will follow Cyrpus’s lead and sell some of their gold stocks, adding further supply to weakening demand.

India, the world’s biggest buyer of gold bullion, is the next  factor for dragging on price of gold.

The country recently introduced a 50% import tax that has  triggered a 24% fall in the amount of gold brought into the country in the frist quarter of this year.

Mohit Kamboj, president of the Bombay Bullion Association, suggested prices may have further to fall: “With more and more countries reducing stocks, the future of gold seems bleak.”

The fall means Cyprus is likely to raise less than the 400m euros ($525m) it hoped for when it announced it was selling the bulk of its gold reserve.

Gold mining company shares fell sharply as a result, with Randgold down 10% on the London stock exchange and Fresnillo down by 14% at noon.

David Govett, head of precious metals at Marex Spectron in London, said there was a mass flight out of gold: “We have seen massive liquidation from all quarters… This is a market that has only got one thing on its mind… get me out.”

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