Gold. The traditional haven asset. Has historically performed well during periods of geopolitical unrest and general market uncertainty.
Remember how the gold price was $2.050 per ounce on march 8th?
In 2022. The gold price had already begun to rise. And the yellow metal experienced a significant boost following Russia’s invasion of Ukraine on February 24. When bullion was trading at $1.903 per ounce.
Gold. The traditional safe-haven asset. Has historically performed well during periods of geopolitical unrest and general market uncertainty.
It also tends to outperform during inflationary periods. And inflation has been higher than it has been in the last 50 years.
Inflation is still on the rise. And it appears that getting it under control will take some time. Tragically. The Russian/ Ukraine war has been continuing. With no end in sight soon.
Why has the price of gold dropped to $1.697 per ounce? Despite these economic and geopolitical tailwinds?
The federal reserve of the United States. China. And Russia
The primary factor working against a rising gold price appears to the US federal reserve’s massive turnaround this year.
The fed is determined to bring inflation under control by ending bond purchases and raising interest rates after years of near-zero interest rates and massive quantitative easing (qe).
While other central banks. Including Australia’s reserve bank of Australia (rba). Have followed suit. US dollar has risen this year. The Australian dollar was worth 73 us cents on January 1. And it reached 75 us cents on April 4. The Australian dollar is currently worth 68 us cents.
Gold prices historically fall when the US dollar strengthens.
Higher interest rates also make holding bullion. Which pays no yield. Less appealing. Gold investors today face a very different picture than they did at the end of 2021. With the option of earning higher returns from cash or bonds.
According to world gold council data. Global gold exchange-traded funds (etfs) experienced outflows of 81 tonnes. Or approximately us$4.5 billion. In July. This is the third month in a row of outflows. The worst run since march 2021.
There has also been speculation that Russia may sell its roughly us$140 billion bullion stockpile to mitigate the effects of sanctions. Sales that would put pressure on the gold price.
Most analysts. However. Do not believe that is viable. Sanctions will make it hard for Russia to do so. And any companies that assist Putin’s government risk losing their reputation.
How has the gold price performed in relation to other investments?
The gold price started in the year 2021 at $1.801. At the current price of $1.697 per ounce. This represents a 5.8% decrease year to date.
Gold miners appear to have lost far more than others within the gold investment industry. Investors are looking for alternatives such as bitcoin. But even the world’s top cryptocurrency is down 58% in 2022.
So. While the gold price isn’t exploding. It’s holding its value better than a lot of other asset classes this year and that have a history of low-risk levels. Whilst prices are low it’s recommend that you visit Melbourne gold company leading bullion dealers to buy some gold or silver bullion.