Eytan Krips

Gold prices hit a 4-month low on Wednesday as markets were pressured by a lower Euro and overreacted to the political upheavals in the Euro zone. Alexis Tsipras, head of Greek's second largest Syriza Party, has so far failed to form a government since Sunday's Elections.

Refreshed concerns about the euro zone have been weighing on gold prices, in particular, Spain, where bond yields have risen recently. Gold prices have now fallen for the fourth day in a row and are resting at around $1,640. While gold rose in 2011 in times of elevated risk aversion, it has since reverted to trading in line with other commodities and against the dollar, which is now the haven of choice.

It is no surprise that the gold price has fallen so far in the last two weeks, considering all the reduction measures it is currently facing, but many commentators still remain confident that we will see new highs this year. After Ben Bernanke's statement last month caused gold prices to plummet, a contradictory statement caused gold prices to regain some ground; The Fed indicated it would not rule out QE3 or other options to stimulate the economy and said that recovery is still "extremely slug

Gold prices fell more than 2% in a straight decline on Wednesday after the market absorbed the Fed statement and the better than expected US economic data. The data was strong enough to further reduce expectations of a third round of quantitative easing (QE) by the Federal Reserve, which has now effectively been wrung out of the market. The FOMC statement was clearly positive about the economy which lead to a round of technical selling that hit gold prices hard and saw them fall to $1,634.09; t

Yesterday, gold managed to break its $200-moving day average and is now trading back above $1,700, just, 3 days of continual loses. Gold prices fell below $1,700 on Monday after official data released from China at the annual meeting of the National People's Congress. China's economic growth target has been revised down to 7.5% and this is the first time since 2005 that China is expecting to see growth fall below 8%.

John Paulson from Paulson & Co. (the biggest investor in SPDR Gold Trust, the largest ETF product backed by bullion) told investors this week that it's time to buy the metal as protection against inflation caused by government spending. The theory is that western countries will continue to keep interest rates low, while printing money which will cause inflation to rocket up, debasing currencies and boosting gold's safe-haven status. Added to this is also the ongoing crisis in Europe.

Gold prices are climbing on the back of a weak Dollar, however for once banks appear to want much higher hold prices, which is strange considering how until now they have done everything in their power to keep them down.

Gold prices hit six-month lows in December 2011 when they came under pressure from investors and banks seeking cash and weak physical demand from China. Since then they have steadily recovered but hovered below the 200-day moving average of $1,634. However yesterday (10/01/2012) gold finally broke this barrier which suggests gold may now gather some momentum and begin rising more steadily.

After gold prices regained considerable ground and broke the $1800 barrier they have now slumped back to below $1700 following heightened Euro zone concern, a disappointing Spanish bond auction and record breaking yields in Italy, Spain and Belgium.

Gold is now trading back at around $1,780 after steadily recovering from its crash to below $1,600 an ounce and then breaking the $1,800 barrier again yesterday after the Euro zone focus shifted to Italy. Everybody is aware that there is still no answer as of yet to the Euro Zone's problems. Every time another half hearted idea appears to be agreed, there is another spanner thrown in works and we are right back at square one again; still faced with the ultimate question, will Greece default or