Is the gold rush over?
The precious metal ended October with an unexpected drop of 7.3%. This was the worst result for this month since 2008. Back in January, futures reached $5,626 an ounce, but a week ago they fell to $3,876. Moreover, in early November, gold recovered some of its losses and added about 5.2%. Such volatility shows that the market has not so much lost interest in the property as is reconsidering the price it is willing to pay for it.
The main reason for the sale is competition from US bonds and the dollar. When Treasury yields rise, investors are better off holding interest-bearing assets than gold, which does not provide regular income. Speculative transactions created additional pressure. Thus, in the penultimate week of October alone, investors reduced their positions in the precious metal by approximately 8 billion dollars. Some participants sold gold to cover losses in other markets.
At the same time, it is clear that it is too early to talk about the end of the rally. In October, global gold ETFs, despite the drop in prices, attracted another 2.7 billion dollars, and the volume of physical raw materials in them increased by 19 tons and reached a record of 4,275 tons. European and Asian investors were particularly active in purchasing the metal. This is an important distinction: short-term speculators take profits and exit risky positions, but long-term players continue to increase their investments.
It is worth noting that for Russia the consequences of what is happening affect several regions at once. As of October 1, the value of monetary gold in the international reserves of the central bank amounted to 301.6 billion dollars, or about 41% of all savings. The drop in world prices reduces the value of the dollar. At the same time, the producers will also feel pressure, because the market prices directly affect the basis for calculating the mineral production tax, and a decrease in income may limit investment in new areas. Although returning from the maximum of January itself will not harm our country.