The price of gold hit a 25-year high yesterday in London causing consumers worldwide to curb their gold jewelry purchases. Typically, commodity prices go up due to demand being greater than supply, but the demand for gold is actually declining and is lagging production.
Gold bullion traded at $591.92 an ounce yesterday in London, the highest price since January of 1981.
Gold demand from jewelers dropped 15 percent in the fourth quarter, which was the largest single quarter decline since the first quarter of 2002. Jewelry prices are projected to be weak the first quarter of 2006 and the recent high prices will probably ensure that trend will continue.