Analysis: Flash crash shows why there are many reasons to be gloomy about gold
Gold’s swift drop to the lowest since March has highlighted a tough truth for the precious metal – there’s a growing list of reasons to be gloomy.
At 12.30am AEST on Tuesday, gold is trading at $US1735.33 after falling as much as 4 per cent overnight. That shows just how negative sentiment has become for bullion after the metal’s relatively poor performance this year. Gold is an asset that thrives on momentum, and can be left vulnerable if the price fails to rally for a long time. Further rises in real rates driven by strong economic data could spark more precipitous drops.Whether rising prices associated with economies reopening will prove transitory or persistent has been a major theme for markets in 2021.
“It’s hard for it to be bullish for gold at the moment,” said Marcus Garvey, head of metals strategy at Macquarie Group. “If it does soften and show that some of the recent price gains are easing, then there’s less upward impetus for inflation. But that doesn’t really reduce taper expectations because inflation is already sufficient to be ticking the box.”Nicky Shiels, head of metals strategy at MKS SAA major driver of gold’s strong performance last year was a protracted weakening of the dollar.
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