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Gold market shows signs of declining

By Liang Jie (People's Daily)

15:25, May 11, 2012

Edited and translated by People's Daily Online

Gold price keeps declining, and the situation will not change in a short period.

Since March 2012, the international price of gold has been declining slowly. In the past two months, it has decreased by about 70 U.S. dollars per ounce or 4 percent. On May 8, the price of gold dropped sharply below 1,600 U.S. dollars per ounce.

Factors depressing gold price

Yuan Lin, a gold analyst said that gold price has not been adjusted for a long period, and this fluctuation is a medium-term technical adjustment that is normal.

According to Yuan's analyses, from the fundamental situation of the global economy, it could be seen that the economic data of the United States is promising in a short term and the U.S. dollar is becoming stronger; the political situation of Europe is facing many uncertainties which are depressing the price of gold.

Some analysts made further explanations, saying that, in Greece, the left-wing political parties and the parties opposing the deflation policy are preparing for establishing a coalition government to go against the current deflation policy; in France, the situation of a left-wing leader coming into power also makes investors doubt whether Europe is capable of solving its debt issue; therefore, capitals are escaping from the gold and choosing the U.S. dollar and treasury securities which are safer, leading the sharp drop of the price of gold on May 8.

On the day, the U.S. dollar index measuring the exchange rate of the U.S. dollar against a basket of currencies was about 79.83, up 0.36 point compared to that of May 7. It had risen for seven successive days, the longest rising period since 2008.

According to Jing Naiquan, head of the China Gold Investment Research Institute, the logic is actually very simple.

Jing explained that compared to the interests of large U.S. monopoly groups of capitals, the interests represented by the U.S. dollar is much higher than the change of the price of gold. The trends of the price of gold in the gold futures markets of Chicago and New York dominate the global trend of the price of gold. Using the power of pricing the gold to safeguard the U.S. dollar's hegemony is the United States' tactic. The day when the price of gold sharply drops is the day when the quantitative easing policy of the U.S. dollar is implemented.

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