Over the last two trading days, gold and silver futures have dropped by 9% and 25% respectively. Up until recently, gold had been regarded as a safe haven investment. As investors sold riskier securities, they bought US Treasuries and gold. Now, gold is being treated as any other commodity. In the last two weeks, gold has fallen in tandem with stock markets while the US dollar has risen. There are a number of reasons for the change in investor psychology: fear of a global recession, the Euro debt crisis, contents of the Federal Reserve's speech on Wednesday and hedge fund selling. Funds were rumored to be taking profits from their gold positions, using them to raise cash for margin calls on other positions or raise money for possible investor redemptions. In a replay of the credit crisis of 2008, funds sometimes have to sell what they can, not what they want.
Sources for this article can be found at www.hedgeworld.com and the New York Times.
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