It seems the "safe haven" of gold is losing its shine as investors flock to the renewed strength of the U.S. dollar amid the dreary global economic outlook, causing the precious metal along with silver to plummet on the trading floor last week.
Last Friday's trading session ended with gold finishing down by 5.9 percent at $1,639.80 per ounce.
Silver futures dropped $6.48 to finish at $30.10 an ounce.
Last week's performance represented the two metals' largest one-day dollar decline. For gold, last Friday was its biggest drop since June 2006, while for silver, it signified an 18 percent fall since 1987.
Fears of another global recession in the offing coupled with an escalating Greek debt crisis led investors to rethink their notion of their asset's safe-haven pull, saying it had become overexposed, thus liquidating their money to treat their precious metals just like any other commodity.
"Gold's fall is a bit surprising. The fact that it has been so volatile lately is perhaps discouraging people from even buying the dips," Peter Buchanan, a senior economist at CIBC World Markets, told the Business Spectator.
It was only last week that mining companies forecast the precious metal would hit $2,000 an ounce by the end of 2011, and rise further to $2,300 by the close of 2012. Gold prices jumped 40 percent in the last 12 months, and were trading at $1,780 per ounce before the fall down. The highest price recorded was on Sept. 6 at $1,921.15 per ounce.
But the metals started its down trek when the U.S. dollar began picking up. In Friday's session, gold disregarded even a depression in the U.S. dollar index as the selling accelerated.
Despite Friday's losses, gold remained up 16 percent year-to-date due to big gains earned in August. Silver futures, however, turned negative, posting a slight loss.
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