Friday, October 17, 2008

Gold Prices 1, Conspiracy Theorists 0

The December contract was recently trading at $791.00 down another $13.50.
From FT Alphaville:

The conspiracy theorists can add another one to their list - gold prices are plunging. But the fall in prices has a much simpler explanation – albeit, we have to admit, one much less James Bond-esque – that central banks selling or lending gold to cash-strapped commercial banks. In reality, investors are behind the drop to one-month low below $800 a troy ounce.

Commodity investors, worried about a global recession and a drop in raw materials demand, have been aggressively selling out of their commodities portfolios, many of which consist of indices and baskets with one link or another to the price gold.

As a result, the price of the precious metal is taking a hit. The S&P GSCI commodity index, the most popular index, has a 2.4 per cent weighting toward gold futures, while the DJ-AIG commodity index, the second most popular, has 7.8 per cent exposure to bullion futures.

Some customized baskets, we have heard, have even a greater share of gold, with percentages closer to 20 per cent....MORE