Gold News

Gold Price Drop: Shades of 2013

Real rates up? ETFs selling? Multi-year support broken...?
SHADES of the 2013 gold crash In Thursday's price drop, writes Adrian Ash at BullionVault.
A rise in real interest rates, plus continued outflows from ETFs, has finally pushed bullion down through a multi-year support level.
Before this morning the Dollar price of gold had tested its post-Covid floor 4 times at $1680 per ounce. Back in April 2013 gold had tested its post-financial crisis floor of $1535 four times before cracking lower.
Nine years ago, that spurred a 15% two-day plunge in spot prices, worth some $1 trillion, with gold losing 25% inside 3 months and setting its worst annual loss since 1981.
So far, so gulp!
Chart of Dollar gold price. Source: BullionVault
But gold's outlook now rests on four key differences between spring 2013 and fall 2022.
First, this technical break has only come in terms of the soaring Dollar. Gold is holding above its summer lows in Euros, UK Pounds and most other currencies, and it's near record highs in Japanese Yen.
That's likely to slow if not stem the drop for US investors, short of the Dollar breaking even further and dramatically higher from its current 2-decade highs on the FX market.
Chart of gold price in Japanese Yen. Source: BullionVault
Second, gold's drop to two-year Dollar lows isn't yet carrying through to other precious metals. Silver prices in particular are refusing to confirm the move so far, still up for the week and almost 10% above the gray metal's own 2-year low of start-September.
Third, gold's approach of and drop through its $1680 floor coincides with heavy selling across other asset classes, from bonds to stocks, crypto to commodities. That should add safe-haven demand to the bargain-hunting we're already seeing on BullionVault in response to Thursday's price drop.
Fourth, and most different to 2013, those rising rate expectations which have pushed gold down beneath its post-Covid floor clearly threaten to worsen the economic slowdown already underway, raising a political challenge to Fed tightening that's already shown in the inverted yield curve between 10-year and 2-year rates.
Gold may very well struggle to rally for as long as the Fed says that fighting inflation remains its No.1 concern. The flip, when it comes, could see a swift and sharp bounce-back.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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