Market Extra: Here’s why gold has been a disaster this year despite geopolitical instability and stock market volatility

by | Oct 21, 2022 | Stock Market

Gold has been a store of wealth for millennia and in more recent times the price of gold has tended to move inversely with equities and dollars, providing investors with some diversification in their portfolios. However, this year gold has so far failed to work as a safety cushion for investors against the volatility in financial markets. Gold prices
hit their lowest levels in two and a half years on Friday morning with the most active gold futures
falling $15.30, or 0.8%, to $1,621.10 per ounce. It was the lowest intraday level since April 2020 when gold traded as low as $1,595.20 on Comex, according to Dow Jones Market Data.

“The key driver was the roughly 20 basis point increase in 10-year Treasury yields
as recent signs that high inflation might be stickier than previously expected suggest that the Fed will remain in a hawkish mood,” said Caroline Bain, chief commodities economist at Capital Economics, in a Friday note. “Admittedly, the gold price hasn’t fallen as far as the sharp rise in real yields might have suggested. But we suspect that the reduced liquidity of inflation-linked bonds might be a reason for this divergence.” See: ‘Fragile’ Treasury market is at risk of ‘large scale forced selling’ or surpris …

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