Gold luster began to fade?
European crisis is prolonged, the decline in yield or yield on U.S. government debt securities and the deterioration of the dollar has become more ‘shiny’ than gold. Investors began to ‘dilute’ gold for dollar assets.
The price of gold which had hit a record high of U.S. $ 1,900 per ounce during September, there were already dropped to 8% in 2 weeks. The largest decrease to a quarter occurred on Monday (9/20/2011) yesterday.
In recent months, gold has been regarded as one of the most solid safe investment, especially when developed countries have to face the economic slowdown and the high debt that should get a stream of liquidity, along with a weakening currency.
In addition, fiscal and monetary policy stimulus that is feared could trigger massive inflation that pushed gold prices.
But fears of a Greek default could drag other European countries, and could further lead to loss of the European banking system led investors are turning to the U.S. dollar is considered more secure.
“People began to move straight to cash rather than seek alternative safe assets such as gold,” said David Meger, metals trade director of Vision Financial Markets was quoted as saying by Reuters on Tuesday (20/09/2011).
Some money managers also expressed his own view of his prudence.
“I’ve pulled my horn a bit, and stay close to neutral. The things in the back of my mind is the situation in Europe,” said Gregory Whiteley, who manages a portfolio of government bonds in Dobleline Capital assets of U.S. $ 16 billion.
Loomis Sayles Vice Chairman, Dan Fuss who manages foreign assets up to U.S. $ 160 billion, said the company increased exposure value of assets the U.S. dollar during the summer because no easing of the problem in Europe and the U.S. economy began to grow.
Said Fuss, Loomis dollar exposure has increased from 60% to 70%, while the exposure of non-dollar decreased from 40% to 30%.
“We increased exposure to assets in U.S. dollars are also due to the world a little scary. There is a short-term tactical movement. That said, the U.S. still owes very much as the best place in the world,” he said.
John Taylor, chief executive officer of FX Concept which manages the fund up to U.S. $ 8 billion, said he still holds a long position for the U.S. dollar. Taylor, who last year predicted the U.S. could enter another recession in 2011 also said he still believes ‘bearish’ for U.S. stocks.
Some analysts said the decline of gold may be a sign, investors who have entered since the beginning of starting to take profits.
As is known, enter the gold earlier this year at a price of U.S. $ 1,400 per ounce and gradually rose up through U.S. $ 1,920 per ounce earlier this month. But slowly, the price of gold are now beginning to recede.
“Gold has lost a little luster, but gold is one of the few assets that has scored short-term gains for everyone lately,” said Greg Salvaggio, vice president of Tempus Consulting.
While Adnan Akan, head of forex Fischer Trancis Trees & Watts In fact, gold might include some assets that investors can be sold to cover losses in stocks and other risky assets.
After the collapse of Lehman Brothers in mid September 2008, he said gold initially rose to 15% as investors sought a safe place. By the end of October 2008, gold actually fell 20% as investors must satisfy margin calls or risky trades.
“You get nervous, volatile movement as we see now and people have to sell what they have,” he said.
The same mechanism tends to push the U.S. dollar at a stressful time for investors who buy at the lowest interest rates to buy assets that yield higher, should hurry to buy back the assets when it began to fall in value.