Although gold prices have fluctuated significantly over the past week, a small margin of confidence has been restored following the stability that this precious metal seems to exhibiting. Falling sharply from a well-established $1275, gold reached a four-month low near $1240, a move which, for many, was as disappointing as it was financially painful. That being said, it seems that this particular price point may signal the full extent of the 'damage', as further losses have not been seen. Given the relative stable nature of the precious metals marketplace, significant fluctuations in gold price are bound to quickly draw attention.
That being said, this new pricing base is markedly lower than the recent high of $1315. Although many believed that market volatility around gold was largely reducing, the fast drop to $1240 has caused some to rethink their original predictions and quickly adopt new tactics in this particular niche of the precious metals marketplace.
The price of gold is, essentially, determined by a variety of factors. The health of national currencies is one of the most significantly influential forces when assessing the overall strength of a commodity. With this in mind, it becomes much easier to understand the relationships between the price of gold and the economic health of the world's prominent economies during the 2008 financial crisis: as markets plummeted, the price of gold soared. Gold is, due to this 'sovereignty' often thought of as a “safe haven” during periods of economic turmoil.
With a number of important policy decisions soon to be announced, including the ECB's potential disclosure of new policy options and the U.S. non-farm payrolls data, gold traders are waiting with somewhat bated breath to see what exactly may happen to the price of gold in the coming weeks. Were the ECB to announce new, looser regulations, many believe that the price of gold would inevitably rise. That being said, the loss of value in the Euro may also serve as a prominent factor in assessing the value of gold in the coming weeks. Volatility, it seems, may be returning to the precious metals marketplace after all.