Gold's Losing Streak: Here's Why It Might Last

By Joe Weisenthal
Business Insider
January 08, 2013

Gold is on its longest losing streak in eight years.

Per The Associated Press, it's now fallen six straight weeks, and is 8% below where it was on October 4.

Why is gold losing its appeal?

There are two main drivers of gold.

One is volatility. When volatility rises, people rush to it as a "safe" asset. Volatility's been getting crushed lately. Even with all of the Fiscal Cliff/Debt Ceiling nonsense, people are starting to become immune to it all.

For a fun chart relating to volatility and gold, here's a look at volatility (red line) vs. the price of gold relative to another popular commodity -- oil (blue line). It's not a perfect match, but it's clear: When volatility spikes, the price of gold surges compared to the price of oil. 


 

[InvestingAnswers Feature: 50 Surprising Facts You Never Knew About Gold]

The other aspect is interest rates. Particularly real interest rates. As real interest rates rise (or start to rise) the dollar holds more appeal, and gold holds relatively less appeal. Interest rates have been ticking up, and there are the first murmurs about an end date for the Fed's extraordinary easing. This, too, makes gold marginally less attractive.

Joe Weisenthal serves as deputy editor at Business Insider.
This article originally appeared as Why Gold Is On Its Longest Losing Streak In 8 Years.

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