The price of gold hit the lowest point for seven and a half months on August 12 as the precious metal was rocked by the strong U.S. currency and weakening crude oil prices, analysts said. On the London Bullion Market, the price of gold tumbled as low as $802.34 per ounce. That was the lowest point since December 21, 2007.
Gold, which is used in electronics, has now shed almost one quarter of its value since striking a record high of $1.032,70 on March 17.
"In the short term, gold prices are likely to continue to take their lead from dollar movements and oil prices," said Barclays Capital analysts in a note to clients. In the foreign exchange market earlier on August 12, the dollar hit a near six-month peak against the euro. The European single currency slumped to $1.4816 -- the lowest point since February 26.
A stronger U.S. currency tends to reduce demand for dollar-priced goods, like gold and oil, which become more expensive for buyers holding weaker currencies. At the same time, gold is regarded by investors as a sound defense against inflation, which in many countries is driven by soaring crude prices. But oil prices have fallen heavily sharply in recent weeks on mounting fears over slowing global growth and lower demand, traders said.
Meanwhile, gold has failed to gain ground this week despite the ongoing military conflict between Georgia and Russia. The precious metal is normally seen as a safe bet in times of global unrest.
Copyright Agence France-Presse, 2008