Around the world, governments are selling some of their supplies, flooding the market, and depressing prices. Australia sold about two-thirds of its reserves in July. Canada has been selling off its supplies. And in late November, a British official said the new European Union central bank likely won't hold many gold reserves. Each announcement heightens pressure on others to sell, before the price falls further.
Analysts say the government sales are another example of gold's diminished cachet.
With currency values no longer pegged to gold, there's little reason for governments to hold large reserves. But central banks don't get pleasure out of it. They stick it in a vault and don't lend it out. Asia's economic problems also have contributed to the sagging price, because Asians have been among the world's biggest gold buyers in recent years, accounting for as much as one-fifth of world consumption. With Asian economies likely to slow, or even shrink, traders are betting that Asians won't be able to afford quite as much gold in coming years.