Investors See Gold Prices Continue to Drop

Investors of gold are still waiting to receive holiday cheer after the first week of December ended. The price of the precious metal has fallen 5% since its highs in October following the announcement by the Federal Reserve of its plans for additional stimulus.

The decline is a reflection of the disappointment of investors who had wagered that a monetary easing by the Japanese and European central banks along with the Fed would increase inflation or at minimal increase fears over rising prices, both traders and analysts expressed.

Neither of those things has materialized as some had anticipated over the five years the Fed had been in its easing mode. That has made more investors start to give up on the precious metal, said an expert trader of the metal.

During the week that ended last Tuesday, managers cut bets on gold prices being higher by the most since March, according to the Futures Commission.

The last two weeks have been rocky in gold trading, with big bearish bets being put on in gold options, rattling investors and a frantic period of selling in the usually quiet period.

Gold was up by 0.2% Friday to end the day at $1,704 an ounce prior to the next Fed meeting scheduled for this week. In addition, economic data that was better than expected in the U.S. buoyed markets and helped to undermine predictions for the dollar becoming weaker, which often times sparks an increase in gold buying. The recent data says analysts helped to remove part of the safe haven elements that gold had.

For the year, gold has increased 8.8% and some money managers have cashed out to receive the gains prior to the end of the year.

 

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