Part of the problem is that when the economic news turns especially bad, cash is king, hence some selling off. There's also strong currency trade-winds gusting about: a strengthened dollar will see less demand for the metal. And if the US dollar strengthens further then it will beat down gold prices further.
Some gold investors may panic slightly and head for the exits. If they've been long-term buy-and-hold investors, they will have had a spectacular run. Roll back to 1999 and gold was selling at $250 an ounce. Today, it's still selling for almost $1600 (down from its recent $1900 peak). But the case for gold still appear solid, as we've outlined.
Why own gold?If the gold price does drop further, then investor sentiment may have structurally changed. Yet we've seen nothing fundamentally change with the world's biggest economy. Spending cuts are still the order of the day, just about everywhere, from Washington to Madrid to London.
Hold your nerveSome professional investors, including George Soros, have already substantially sold down their holdings. (Many would not want to bet against Soros.) So if you own gold or gold shares, you might want to consider just why you do own this commodity. Long-term gold bugs should be used to market corrections.
Given the state of the global economy, the recent sell-off may be a buying opportunity. The fundamentals, it bears repeating, haven't changed one bit.