The Real Reasons Gold Dropped On Wednesday And Why You Shouldn't Worry

Gold last traded at $1,878 an ounce. Silver at $23.62 an ounce.

NEWS SUMMARY: Precious metal prices rose on safe-haven buying and a weaker dollar. U.S. stocks fell as major indexes headed for the worst week since March; amid downbeat earnings, failed stimulus talks and rising CV-19 worries.

 Constable/Forbes---"Gold prices took a significant tumble Wednesday. But that doesn't mean that long-term gold investors should turn bearish...But here's what's really happening, and it is nothing to do with investors souring on gold as a long-term strategic asset. First, stocks dived Wednesday on the back of the news that infections of the COVID-19 virus have ballooned...At the same time as investors were dumping stocks they were fleeing to the perceived safety of U.S. Treasury bonds. But here's the key - the value of the dollar and the price of gold tend to move inversely. In other words, when the dollar rallies, gold tends to fall. A simultaneous stronger dollar and weaker gold prices shouldn't surprise anyone. There's a further reason for gold to have dropped to precipitously. Many investors buy stocks using borrowed money known as margin. When the stock price declines by a significant percentage, then the investors often need to provide their stockbrokers with more cash as collateral on the borrowing. So what do some of these cash-strapped investors do? They sell some of their gold to get the cash needed to send to the stockbroker....So in many ways, investors should expect gold prices to take a tumble when the stock market dips...this drop could be a buying opportunity."