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Saturday, 8 December 2012
Reasons For Gold Being Weak
The recent weakness in gold is the result of selling by futures traders, said Commerzbank in a commodity snippet.
Spot metal hit a four-week low of $1,685 an ounce Wednesday, while the Comex most-active February contract hit a four-week low of $1,686.
"In euro terms, the yellow precious metal has fallen to around €1,290 per troy ounce, actually putting it at its lowest level for 4½ months," said the second largest German bank.
If ECB cuts the interest rates, then that can increase the money supply in the economy weakening Euro and strengthening Dollar. This means gold prices would weaken further as gold and dollar are inversely related. But, what eventually happens is that investors would invest the profits they booked in Dollar trade in low-hanging gold. That means gold prices would climb further from the lows.