Gold has always been a safe investment. You could hear from every corner that gold is the almost only safe investment you can make in times like this. And the gold price was stable for a long time. Even more, the gold price was on the rise for a long time. The price for physical gold broke its own records day after day. There was no end to see. Every day the price climbed a little bit higher on the ladder. But then suddenly in August 2011 the price of gold fall rapidly. Now many investors ask themselves: What were the reasons? And is gold still a safe investment?
The reason for the collapse was found in two occasions that has occurred only a few moments before. The rally, in which the gold price was in, began with the highest price gold ever has reached. The price for one fine ounce was 1911 Dollar. But then the price for a fine ounce rapidly decreased. It happened even faster, than the gold price increased in the weeks before. And that was something you could hardly imagine. In two days the price sank to about 1700 Dollar, more than 200 Dollars. A little bit later the price stabilized to 1740 Dollar. The reason for the stabilization was new exchange losses on the stock markets. But still, the price dropped dramatically compared to the maximum stage, it has reached just a few days earlier.
But the decrease had a few reasonable causes. First of all, the actions of the CME Group did its bit to the loss. The CME group, one of the biggest options exchange in the world, raised the margin 27 % all at once. But that was not the first time in this month. Already some time earlier the Group raised the margin. And since the margin is needed for the trade with gold, the enhancement affected the gold price, too. Before that incident the same happened in Asia. The commodities exchanges in Shanghai and Hongkong raised the margins as well. The motive behind all these actions was the attempt to stabilize the market of gold. Through increasing the margins the variations at the market would not be as high as before. Now the speculations out on the price of gold would be more expensive and far less attractive.
The second reason was the profit the investors could make. Many investors just took the gains due to the record prices from the market, as Nigel Longley, the manager of ETF Securities confirmed.