Gold prices drop as uncertainty over Greece and Italy grows

Gold prices have been sliding backwards and forwards over the past several months in light of economic instability across the globe, but the trend lately has been towards a decline, which stayed true today as gold prices fell in light of the ongoing European economic woes.

The economic instability caused the euro to drop to near one-month lows against the US dollar, which prompted a drop in gold prices as many investors use gold to protect themselves from a drop in value of the dollar.

Much of the concern stems from the economic turmoil that came to a head in Greece and Italy over the past several months. Of particular concern to investors at the moment is Italy, which had to pay a higher than usual interest rate, 6.39 percent over 5.32 percent, in a recent debt auction.

The situation over in Greece has seen very little in the way of improvement either, with Greece Prime Minister Lucas Papademos saying on Monday that it’s uncertain whether or not the country will be able to make its deficit reduction by year’s end.

“You can argue that we haven’t seen anything but escalation (in the crisis) in the last two weeks and gold has not done anything meaningful on the upside, but investors have been voting with their caution and moving into gold,” Ole Hansen, senior manager at Saxo Bank said (via Reuters).

“The price hasn’t budged so someone is getting rid of gold up here. Whether that is because we are approaching the end of the year and the time when profits are booked and locked in … remains to be seen.”

via Christian Science Monitor

[Image credit:]