Gold prices are slowly returning to US$1,200/oz, having reached US$1,190/oz on Tuesday following a recent freefall that pushed the prices from a record high of nearly US$1,250/oz to below US$1,175/oz. The decline came as investors were rapidly dumping assets including the safe-haven precious metals to offset losses from sharp declines in equity markets. Now, however, safe haven demand has returned as the markets remain in selling mode with the UK’s FTSE 100 and the Dow Jones Industrial Average standing well below the key 5,000 and 10,000 marks respectively.
Investors are facing uncertainty due to doubts that the recently agreed on €750 billion rescue fund will be sufficient to stop the debt crisis that has put Greece on the brink of bankruptcy from spreading into other euro zone states and the political destabilisation caused by the escalation of the tensions between South Korea and North Korea that could potential lead to a large scale military conflict.
Gold has been increasingly seen as a hedge against risks associated with volatility in currency and equity markets. Before the debt crisis kicked in to destabilise the euro and European markets, gold served as an investment alternative to the US dollar and moved inversely to the American currency and in tandem with the euro.
Other precious metals retreated after making gains earlier today with silver sliding to US$17.61/oz and platinum dropped to US$1,493/oz.
Major mining stocks fell today. Randgold Resources (LSE: RRS), platinum miner Lonmin (LSE: LMI) and silver miner Fresnillo (LSE: FRES) slipped 1.6%, 3.5% and 3.7% respectively.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) lost nearly 5%.
In the FTSE 250, silver producer Hochschild Mining (LSE: HOC), gold miner Petropavlovsk (LSE: POG) and Aquarius Platinum (LSE: AQP) slipped 3.1%, 4.8% and 6.7% respectively.
Commodity asset development company Mercator Gold (AIM: MCR) followed with a loss of 6.5%, while Philippines focused gold producer Medusa Mining (AIM&ASX: MML) and Fiji focused gold miner Vatukoula Gold Mines (AIM: VGM) slipped 6%.