Spain’s Financial Health Causes Gold Prices to Drop by 1%

July 31, 2012 - by buygold.co.uk · Filed Under Gold News Leave a Comment

Gold prices dropped considerably as worries about the financial health of Spain deepened all over the world. The prices reduced by an excess of 1% and even the Euro suffered due to the increasing pressures. The Euro slowly fell to almost a 2-year low against the United States dollar and the stock markets also felt the heat. This potentially could push the amount of money Spain borrows to a record tally in the Euro-era.

Murcia’s Call for Government Aid Instigates the Worries

Spain was already a cause for concern amongst the investors because of its financial condition. The fears of a full bailout requirement re-materialized when Murcia region requested the financial aid of the government to help it cope with the crisis. Murcia becomes the second state in Spain to request financial aid after Valencia, thereby indicating the imbalance caused due to the Euro zone crisis. Spain is incidentally one of the worst hit countries due to the crisis.

Spot Gold Down by 0.8%

The relentless pressure of the dollar on the Euro and other wider markets caused a dip in the prices of spot gold also. The prices went down by 0.8% to a value of $1,572.10. This was the price recorded at 0905 GMT but the spot gold prices were at $1,568.04, a record low.

More About Dollar Pressure than Euro Crisis

Eugen Weinberg, an analyst from Commerzbank, said that the fall in gold prices was more due to the relentless pressure on the Euro from the dollar rather than the deteriorating financial condition in the Eurozone. He said that because gold and dollar has an inverse correlation, prices will continue to drop as Euro lacked the financial aid to fight back against the dollar. He added that investors from the US were reluctant to invest in gold because of the negative correlation.

However, Weinberg added that there was no reason to panic as gold was doing well in terms of the Euro. He predicted that the pressure would still be heavy on the Euro but until gold prices stay over $1,530, the Euro will still be in the slow recovery phase.

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