The stock market seems to be in free fall lately and many investors are in panic mode. Stocks are selling off and you can feel the panic. A 500 point drop in the Dow as we had yesterday is nothing to sneeze at and is a true indication that investors are very nervous.

It is times like these that you would think the price of gold should be going up. Most people own gold in their portfolios as hedge against down times in the stock market. Usually, when stocks go down, the current price of gold will tend to go up. That is why people own this type of investment.

In this situation in September 2008 however, gold continues to go down with the stock market. The safety gold is supposed to provide is failing. sO, Why is gold going down? Is it because the dollar is strengthening against other currencies. Typically, when the dollar is weak (and it has been very week in recent years), the price of gold goes up.

Another reason why gold is going down may be because of the activity of banks and hedge fund managers that are in trouble. Because they have made a lot of bad bets which has led to this weakened economy and stock market panic, many investors want their money now. These financial institutions may be having to sell their good investments such as gold in order to cover their losses. This continuing selling of gold will of course drive the current price of gold down.

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