Published: 10 June 2013

The price of gold is plummeting to its lowest level in more than two years.

The gold spot price fell as much as 6% on Monday‚ hurting gold stocks which tumbled in excess of 10% to fresh multi-year lows before pulling back slightly‚ amid continued negative sentiment around the sector.

The precious metal extended its decline after plunging on Friday, when the US government reported that wholesale prices fell in March by the most in 10 months.

The gold index dropped more than 7% - for an 18% loss this month - to its lowest level since November 2008.

Independent analyst Ian Cruickshanks said the outlook for the gold price and gold stocks was gloomy. “There is less demand for gold as a hedge against inflation‚ which is likely to trend lower if brent crude dips and stays below $100 per barrel. The US‚ which is the biggest importer of oil‚ is moving towards self sufficiency‚” said Cruickshanks.

Brent Crude was about $101 per barrel‚ down about 3% on last week.

Gold spot fell to an intraday low of $1 385.45oz‚ its lowest point since February 2011.

Investors tend to buy gold when they expect inflation to increase. Any indication that prices aren't rising prompts investors to sell gold.

A proposal that Cyprus sell some of its gold reserves to support its banks has also rattled the market. Traders worry that Spain, Italy and other weak European countries might do the same.
- AP

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