Gold Faces Headwinds

Since the beginning of the recession, gold prices have been riding high. True some of the initial hysteria (remember the relentless “Cash for Gold” advertisements?) has died down a little from when prices peaked around $1,900 in August 2011, but gold is looking good.

For now.

Gold was having a turbulent day on Wednesday, July 11, before the Fed released its minutes, and afterwards the price dropped. The news that the Fed likely would not offer another round of quantitative easing was a blow to gold, because no easing means no inflation, something gold investors would like to see.

There’s a lot that can affect the price of gold, and it seems like the gold love affair might he tapering off, particularly because of worries about Europe. The continued European debt crisis has caused bullion prices to fall.

The future of the euro will greatly affect gold, because if the crisis gets bad enough the euro could collapse, causing a gold-buying frenzy. But, if the Eurozone stays committed to saving the currency, then there will be less incentive to buy and invest in gold.

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And falling gold prices don’t exist in a bubble of their own. As prices of gold fall, it will affect mining companies, according to . With prices of other metals already down, these companies were relying on strong gold prices to carry the weight.

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And according to , gold will probably continue to fall lower. Until prices hit bottom, investors will be wary about buying gold right now.

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