Gold price drops to lowest level since 2010

The Gold price fell to its lowest level since 2010 this week after the U.S. central bank announced it would end its stimulus program. While this didn't really come as a surprise, it gave investors confidence that the central bank has the situation well under control. The lack of high inflation and the strong dollar makes gold less attractive, with the result that the price has been under pressure for some time. The fact that the US economy is now growing again at an annual rate of 3.5% is further weighing on the gold price.

Gold

At the time of writing, gold is at $1,172 per troy ounce, which is below the support level that has been tested three times in the past two years. For technical analysts, this is a very negative signal. If the price of the precious metal fails to move above the support level at around $1,180 soon, the price could fall much further.

In euros, the gold price currently stands at €933 per troy ounce, the lowest price since June. Since the beginning of this year, the precious metal in euro terms is still up almost 9%, a gain that can be attributed entirely to the weakening of the euro against the dollar.

Gold price in dollars drops to lowest level since 2010 (Source: Goldprice.org)

Silver

The picture doesn't look so favorable for silver either. The Silver Price fell 4.81% on Thursday and fell another 1.78% on Friday. The price for a troy ounce of silver is currently $16.10, the lowest level since February 2010. As a safe haven, silver is also suffering from the stronger dollar, positive sentiment in the stock market and the absence of high inflation.

Silver is also relatively low in euros, the price for a kilo is €412 at the time of writing. In two years' time, the price of silver has halved, because in October 2012 people were still paying more than €800 for a kilo of silver. The silver price in euros has not been as low as it is now since March 2010.

Oil prices

The low oil price also has a downward effect on the prices of gold and silver. Société Générale's commodities expert Michael Haigh told Bloomberg that lower energy prices have a downward effect on inflation, which in turn is negative for precious metals.

According to Jeffrey Currie of Goldman Sachs, the price of gold could fall to $1,050 per troy ounce. According to him, that level can still be reached by the end of this year. Earlier this year, geopolitical developments in Ukraine and the Middle East caused the gold price to rise, but that increase turned out to be short-lived.