Gold prices plummet to 2-year low

Markets were spooked after news leaked that the European Commission had pressured Cyprus to sell off its reserves

Topics: GlobalPost, gold, Cyprus, European Commission, European Union, ,

This article originally appeared on GlobalPost.

Global Post

BRUSSELS, Belgium — Gold is usually seen as a safe haven for investors in times of trouble, but it seems the euro crisis may have turned financial wisdom on its head again.

The price of gold dropped as low as $1,384.60 an ounce on Monday, its lowest level in more than two years.

The news comes after leaked documents last week revealed that the European Commission advised Cyprus to sell off 400 million euro ($524 million) from its gold reserves, which spooked markets big time, triggering fears that other, bigger euro-zone debtors could also be pressured to dump their bullion on the market.

Stan Shamu, market strategist at IG Markets in Melbourne, said that gold’s losing value can largely be blamed on fears stemming from that news.

“This is after ECB President Mario Draghi put pressure on Cyprus to sell its excess gold reserves to help fund the bailout and plug a 6 billion euro gap,” he wrote in a note to investors that the Wall Street Journal obtained.

“Although Cyprus is yet to decide how it’ll fund the gap, these comments have rattled investors and caused the selloff,” Shamu added.

The troubled states of southern Europe hold major gold stocks. Italy has the world’s fourth largest reserves — worth around 95 billion euro ($125 billion). Spain, Portugal and Greece hold around 30 billion euro ($39 billion) more.

Putting some of that on the market could put a sizeable hole in their debts, but fear of a fire sale would also push down prices which is why, until last week’s leaked EU plan for Cyprus, no one has been planning to sell.

The euro zone impact on the gold crisis has been compounded by other factors — fears of a Chinese economic slow down have hit a range of commodities, including gold.

There is also a growing view that the gold had risen to unrealistic levels, especially due to the lack of inflation risks in the world economy. Conversely increased confidence in the US economy many have persuaded some investors to switch from metal to shares.

Silver, platinum and copper prices have also tumbled. Of course, investors have predicted the economic collapse of gold for years, and many investors had long given up on gold and other precious metals, ABC News reported. Last week, Goldman Sachs also predicted gold prices would tumble.

Though Cyprus’ gold sale by itself would not be significant, the potential sale has created fears that other indebted euro zone nations could also be under pressure to sell their reserves.

“If Cyprus can break the gold market, then [there are] many reasons to be worried, with Slovenia, Hungary, Portugal, Spain and Italy in line,” Milko Markov, an investment analyst at SK Hart Management, told the Guardian.

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 8
  • Close
  • Fullscreen
  • Thumbnails
    Sonic

    7 ways Americans have defiled the hot dog

    Sonic's Bacon Double Cheddar Croissant Dog

    Sonic calls this a "gourmet twist" on a classic. I am not so, so fancy, but I know that sprinkling bacon and cheddar cheese onto a tube of pork is not gourmet, even if you have made a bun out of something that is theoretically French.

    Krispy Kreme

    7 ways Americans have defiled the hot dog

    Krispy Kreme's Doughnut Dog

    This stupid thing is a hotdog in a glazed doughnut bun, topped with bacon and raspberry jelly. It is only available at Delaware's Frawley Stadium, thank god.

    KFC

    7 ways Americans have defiled the hot dog

    KFC's Double Down Dog

    This creation is notable for its fried chicken bun and ability to hastily kill your dreams.

    Pizza Hut

    7 ways Americans have defiled the hot dog

    Pizza Hut's Hot Dog Bites Pizza

    Pizza Hut basically just glued pigs-in-blankets to the crust of its normal pizza. This actually sounds good, and I blame America for brainwashing me into feeling that.

    Carl's Jr.

    7 ways Americans have defiled the hot dog

    Carl's Jr. Most American Thick Burger

    This is a burger stuffed with potato chips and hot dogs. Choose a meat, America! How hard is it to just choose a meat?!

    Tokyo Dog

    7 ways Americans have defiled the hot dog

    Tokyo Dog's Juuni Ban

    A food truck in Seattle called Tokyo Dog created this thing, which is notable for its distinction as the Guinness Book of World Records' most expensive hot dog at $169. It is a smoked cheese bratwurst, covered in butter Teriyaki grilled onions, Maitake mushrooms, Wagyu beef, foie gras, black truffles, caviar and Japanese mayo in a brioche bun. Just calm down, Tokyo Dog. Calm down.

    Interscope

    7 ways Americans have defiled the hot dog

    Limp Bizkit's "Chocolate Starfish and the Hot Dog Flavored Water"

    This album art should be illegal.

  • Recent Slide Shows

Comments

0 Comments

Comment Preview

Your name will appear as username ( settings | log out )

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>