Gold price has been largely fueled by widespread liquidation stemming from concerns over the European sovereign debt crisis and a double-dip recession

The recent weakness in the gold price has been largely fueled by widespread liquidation stemming from concerns over the European sovereign debt crisis and a double-dip recession in the U.S. Although these same concerns helped propel the gold price to a series of new record highs in July and August, the yellow metal fell victim to significant selling pressure over the past month. With investors forced to raise cash, many sold one of the top performing asset classes this year – gold.

Looking ahead, recession and sovereign debt fears are likely to continue to serve as key catalysts for the gold price. Commenting on the developments in Europe, Dennis Gartman – publisher of The Gartman Letter and a long-time commodities investor – wrote on Friday that “The passage of the expansion of the EFSF’s (European Financial Stability Fund) duties and powers does not end the problems for Europe, and indeed in the case of the Germans it has only begun a new series of problems, not the least of which is that now that Greece has been effectively bailed out, the other troubled nations of Europe shall line up, one behind the other, for the same bailing-out.”

“We have ushered in the era of ‘Me-Too’,” Gartman added. “Italy will want the same treatment that Greece has gotten, or will soon be getting; Portugal will want the same; Spain the same, and eventually this will extend beyond what we commonly refer to now as the PIIGS.”

The gold price advanced over 2% Tuesday morning, climbing $48.90 to $1,669 per ounce. The price of gold has been mired in a correction that at one point wiped away over 20% of its value. Since touching $1,533 per ounce on September 26, gold has bounced over 8% to its current level above $1,650 per ounce. Heavy liquidation in the broader stock and commodity markets, as well as rumors of outsized hedge fund selling, has pressured the Gold.