Gold has once again fallen victim to global economic concerns, dropping to a four-week low this week on the back of US budget talks and the ever-looming threat of the fiscal cliff. Investors engaged in another commodities sell-off, sending gold to $1,686 on Wednesday, its lowest price this week. But what goes down must, at some point, come back up — and after a two-session decline, gold investors can breathe a little easier: Thursday saw spot gold prices back to toying with highs above $1,700 per ounce.
On Tuesday, Bart Melek, head of commodity strategy at TD Securities,
Bloomberg, "[g]old is being sold along with just about everything else in commodities with the worries on the fiscal cliff." Gold, which is widely known as a safe haven asset, is just as susceptible to economic concerns as other commodities, as has been showcased by "knock-on effects" brought on by the threat the fiscal cliff poses to the global economy.
As volatile as gold has been of late, investors buy it up whenever the price is right. The yellow metal's discounted price has presented investors with a good buy, and many were taking advantage of that on Thursday.
Also helping gold shake off some of its losses is renewed interest in safe-haven buying spurred by European Central Bank (ECB) President Mario Draghi's
at a press conference. Draghi hinted further interest rate cuts may be put in place to boost economic growth in Europe. The ECB has cut its growth forecast for the year, anticipating a contraction of 0.5 percent, 0.4 percent higher than originally expected. Low interest rates are considered inflationary and therefore bullish for precious metals.
Gold investors are waiting with bated breath for Friday's release of the non-farm payroll data and the upcoming Fed meeting slated for next week, where hopefully a resolution will be reached regarding the fiscal cliff. If the US is unable to save itself from falling off the cliff, "the possibility that a $600 billion package of tax hikes and spending cuts due to kick in in the New Year could push the world's biggest economy back into recession," according to Reuters.