The fall of gold prices
The recent twin disaster in Japan has opened a new spectacle that explains how natural disasters in a robust economy can penetrate into the economies of the rest of the world. Food export, manufacturing industries are definitely among the affected domain within Japan which has impacted other economies of Asia also. But how wondrous it is to see that gold prices have been affected by Japan disaster! It may sound at firsthand that it is just a coincidence that after Japan’s devastation gold prices have dropped. However, it is a fact that the earthquake and tsunami of Japan made price of gold fall sharply.
Immediately after the quake hit Japan and the new of the calamity speeded to reach other parts of the world, gold prices dropped by per ounce. This is not a strange missing link between natural disaster and price of gold, but rather this effect can be explained with a strong basis of logic. A sudden shock in terms of event risks like terror attack, raging of war or natural disaster which append lately in Japan makes the investors in the financial market tilt towards the equity and shares. Naturally, the risk is laid upon the precious metals like gold and silver. The investors tend to find the equities and shares as safe haven for investing as they can fetch liquidity. Upon the breaking news of Japans devastation which was followed by the possible meltdown of the nuke plant in Fukushima, investors have shown distaste for gold, bringing down the price of gold. They have shown favor for their position in cash and have thus shifted to safe securities that can fetch them instant liquidity.
The fall of gold prices had its own effect on other essential commodities like crude oil. The downbeat impact of gold value fall has translated into the fall of crude oil price as the third largest economy will be in need of it now. As the oil prices run parallelly with inflation, fall in crude oil prices will be directly impacting the price of gold.
The precious yellow metal which is a treasure all across the world has also shown its effect in India market. The investors in Indian share market have rushed to obtain cash that can meet up the loss of share equity damage due to Japan’s disaster of late. This has made them sell of gold and put pressure on its price. As the catastrophe is Japan is yet to be over because nuke plant blast and high fear of nuclear radiation exposure in the nation, the gold price is supposed to witness more pressure in near future. Whatsoever are the consequences, precious metals like gold and silver turns out to be a fair mean of hedging during event risks.
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