Today’s Gold price: Are Gold fundamentals safe?

Today, gold prices tumbled sharply by 4.25% to Rs.25600 per 10 grams, down almost by Rs.1135 from previous session. Silver prices reflected even worse story – with the white shiny metal losing a tenth of its value, showing a cut of Rs.6200 at Rs.48000 per kg.

While one can understand the proportion of drop in silver prices on account of its value as an industrial metal lead by fears of impending global recession, a sharp correction in gold prices has taken bullion investors by a bit of surprise despite prevailing situation of global economic slowdown and financial panic spread across the world.

However, most market analysts have attributed the slump in gold prices to strengthened dollar and deflation of over-extended gold prices over last one year. Despite tattering fundamentals of US dollar, fears emanating from global crisis have lured investors to park their money in safe-haven dollar reserve currency.

Gold is traditionally perceived to move in inverse relationship with dollar currency. The US dollar and gold prices generally trend in opposite direction. This inverse relationship is often not evident on daily or weekly charts of the duo, but is more clearly depicted in long-term charts since a long time.

Now, that the US dollar has moved up secularly over the last one month; the inflated prices of gold has busted, despite gold’s safe-haven characteristic which should have seen through the yellow metal withstand its peak levels amid double-dip recession fears in the US.

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