Gold dropped 1.5% as part of an over-all retraction in the commodities market. Gold made an 8% gain in the last month continuing it’s decade long bull run. The current retraction in price resulted from a broad sell-off in response to Japans current nuclear crisis.
UBS strategist Edel Tully in a note to CNBC said, It’s not unusual for gold to tumble during initial episodes of a severe broad asset sell-off. Investors sometimes have little choice but to sell the yellow metal to cover margin calls and losses elsewhere before gold then divorces itself from the downtrend. Yet, the big picture on gold shows strong demand continuing as a safe haven investment. Tully went on to add, In the current climate there is more opportunity for gold to rally, as the need for safe havens accelerates.
Japan’s Nikkei dropped 11% overnight on the continuing crisis starting with earthquakes & tsunamis, currently the impending nuclear disaster. We all hope for a speedy recovery in Japan. It seems this crisis along with ongoing turmoil in the Middle East will keep pressure on gold & silver demand for the foreseeable future.