Gold is a safe haven in times of crisis. Nonetheless, prices have begun to fall on the international markets over the last few days. On Friday, 17 May the price fell for the seventh straight session, its biggest downward streak in four years. It closed at US$1,362.20 per ounce, losing US$23.90, a 1.72% drop from the day before. This data from the commodity market of the New York Stock Exchange and which financial analysts and the Wall Street Journal are echoing, represent a break from the positive outlook held in the Dominican Republic. If this downward trend continues with gold prices, the resources that the government will receive will be less than projected.
The government, after the agreement reached with Barrick Gold, will receive US$2.2 billion over four years. For this year, they had projected receiving US$550 million from gold exports, but in the negotiations, the company made any additional benefits received by the DR conditional on the price of gold staying at US$1,600 per ounce on the international markets.
Over the last decade the price of gold has gone up steeply. The price has multiplied sevenfold, from US$200, and in 2011 it reached it historic high of US$1,920. Over the last 18 months, prices have varied between US$1,600 and US$1,800 per ounce, but since the month of April, the price of gold began to fall down to US$1,400, reaching a minimum of US$1,320 in the middle of last week.
Friday’s fall, the biggest so far, resulted from an increase in the value of the dollar, after comments by an official of the Federal Reserve of the United States that the Fed would soon be able to reduce monetary relief. That day, the price of gold operated with a maximum overnight of US$1,388.60, and a minimum of US$1,359.30. On Thursday 16 May it closed at US$1,386.10 in New York.
The decrease in the price of gold, according to analysts, is linked to the strength of the dollar and with the fall in production in the Chinese economy, which has grown less than predicted, minimizing investors’ hopes for the recovery of the world economy. Another factor was that last week, Cyprus announced that it planned to sell some of its gold reserves, which has increased concerns about the situation of the countries in the Euro zone. They cite, in addition, the fact that a “tug-of-war” in the gold market is going on between the strong purchases of physical gold in Asia and the sale of virtual gold, or gold-backed securities.