Gold prices have plunged over 3 percent and have fallen $40 from their overnight high to nearly $1200 an ounce. There are likely several factors at work in this selloff — and not necessarily in this order:
- Euro recovery, after the Spanish bond auction went better than expected and demand for short-term loans from the ECB wasn't as heavy as anticipated
- Long liquidation, as traders face margin calls in equities/other commodities they're selling the profitable positions in gold (after all, there were likely a ton of longs in this market. CME just reported open interest in gold swelled to a new record yesterday at over 605,000).
- Repositioning as hedge funds unwind their long gold/short euro trades at the start of the quarter