Source: Radio New Zealand
Gold prices have slipped in recent days. 123RF
Gold prices have slipped in recent days, but there are predictions that it might not last.
Precious metals have had a record-breaking run amid fears about inflation and the US dollar.
But the price of gold is down just under 15 percent over 30 days, in US dollar terms. It is still up more than 40 percent year-on-year.
Mike Taylor, founder of Pie Funds, said gold had not been a perfect hedge in times of market turbulence, even though it had that reputation.
“As they say, the only perfect hedge is in a Japanese garden,” he said.
“My understanding is that gold was a source of liquidity the past week given its recent strength. Investors using it as a source of funds. I suspect that there were are number of CTA funds that were long, but sold on the break below $5000.
“In addition, the sharp jump in interest rates and inflation expectations will have been a headwind.”
But he said the trend might not last.
“I would expect it to find some support here as the currency debasement trade has not gone away. Nor has the desire for countries to diversify away from the dollar. In fact, this narrative has only become stronger. What country will trust the US after this war, and by default the USD?”
Generate investment specialist Greg Smith said it had not performed as a safe haven because it was already highly valued going into the latest geopolitical crisis, which he said made it vulnerable to a pullback as momentum faded.
“Investors have been taking profits to offset losses elsewhere. At the same time, rising bond yields have increased the opportunity cost of holding a non-yielding asset like gold, weighing on prices. Central banks are looking more hawkish given inflationary pressures, so not great for gold. There are also signs that central bank demand may be easing or even reversing, with some countries potentially selling gold to fund higher energy and defence costs – further reducing support.”
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