Gold meltdown

Gold prices tumble 5 per cent.

New Statesman
Photograph: Getty Images

Gold prices tumbled today a further 5 per cent on an existing slide, bringing them to their lowest level in two years.

Gold has been worrying investors for the past few months, adn has now fallen 26 per cent since its high in Spetember 2011. Silver has fallen alongside, dropping 10.8 per cent today.

Here's the FT:

The negative mood has been heightened by the news last week that Cyprus would sell gold as part of its bailout. Although the quantity of gold involved is small in the context of the overall market at roughly 10 tonnes, gold traders saw the move as setting a precedent that could allow other eurozone countries with much larger gold reserves, such as Portugal or Italy, to follow suit.

“Clearly a much greater element of doubt – about the independence of central banks, their control of gold reserves, and the sanctity of EU treaties – now exists in the gold market than it did a week ago,” said Tom Kendall, precious metals analyst at Credit Suisse. “Once again gold investors are being reminded that the metal is not a very effective hedge against broad-based risk-off moves in the commodity markets.”