Gold price plunges last Friday night by 5.03% to USD1485.6 which is the lowest since last April. WTI Oil price drops by around 3% to USD90.66 which is the lowest since last July as well. As a few reports illustrated, 'Cyprus sell-off fears send gold price tumbling' (Elliott, Larry). The unsolved question was posed by Milko Markov, an investment analyst at SK Hart Management, 'if Cyprus can break the gold market, then there are many reasons to be worried, with Slovenia, Hungary, Portugal, Spain and Italy in line'. At the meantime, if we attribute the fall to the sell-off by Cyprus, how can we interprete the drop of the WTI Oil price.
Admittedly, the market has got the consensus of the bear of Gold due to a number of reasons. For instance, one of them is the rekindling expectation of the end of QE3, although, Peter Newland (economist at Barclays) said 'We continue to expect asset purchases to continue at the current rate for the rest of the year'. According to another person Patrick Legland in SG, 'Low real interest rates have helped gold (reducing the opportunity cost of holding it) but recent falls in [the expectation of] inflation have caused real rates to rise'. As a consequence, he has produced a forecast for an end-year Gold price of USD1375(average USD1500).
The sudden plunge could probably has other reasons. At least, the recent political tension might be the causes leading to the higher volatility of the raw material prices as well. However, before this can be convinced, we still have a lot to do.
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