16 Apr 2013

Price of gold falling

5:32 am on 16 April 2013

Gold has fallen 9.1% to $US1395 an ounce, its lowest level in two years, as fears of high inflation recede.

Investors typically buy gold to protect against inflation, which erodes the value of cash investments.

But investors are now expecting the US Federal Reserve to tighten monetary policy by ending its programme of quantitative easing (QE).

Fears of falling global demand also undermined the price of gold. Other commodity prices fell back too.

China announced on Monday that its economy grew 7.7% in the first quarter, lower than forecasts and below the pace of growth of recent years.

Oil was also affected by reports of falling demand, with Brent crude falling 3% to $US101 per barrel.

The BBC reports silver was down by 10% at one point, while copper fell to its lowest level in 18 monthns at $US7085 per tonne, and aluminium sank to a 3½ year low.

An announcement by Cyprus last week that it was planning to sell most of its gold reserves coincided with the start of gold's decline.