Gold has slid to around $1,550 an ounce, a level not seen since last December. It remains almost a fifth below its record of last summer. But don't write off the decade-long bull run just yet.
The latest dip was a result of short-term speculators, who tend to dominate the paper (futures) market, bailing out, as Eugen Weinberg of Commerzbank points out. These rattled investors, perhaps under pressure to cash in a highly liquid asset, have fled.
But inflows into exchange-traded funds backed by physical gold, which tend to reflect long-term investment, have held up well. What's more, "the fundamental factors that have driven the gold bull market remain very much in place", says Morgan Stanley.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Fears of another banking crisis amid a Greek exit from the eurozone are growing. This also raises the likelihood of further central bank action to calm markets and alleviate a possible slump. Money printing, along with the European Central Bank's large liquidity injections for the banking system, has been good for gold. And real interest rates are negative in much of the developed world, which will also fuel fears of an eventual jump in inflation.
So the global financial and monetary system is still far from normalising, and could well deteriorate further. Tight supplies also bode well for gold. "We are buyers of gold here," says Morgan Stanley.
-
Premium Bonds winners announced – did you scoop the September jackpot?NS&I has announced the winners for September’s Premium Bonds prize draw, with two lucky savers becoming overnight millionaires. Did you win this month?
-
What is the 25x retirement rule and does it work?The 25x retirement rule has been around for decades but many experts question if it is a suitable strategy
-
France’s government collapses – could it trigger the next euro crisis?Briefings France’s government has toppled after losing a vote of no-confidence, plunging the euro zone’s second-largest economy into turmoil. Is this 2012 all over again and should Europe be worried?
-
The junk-bond bubble burstsNews Yields in the US high-yield bond market (AKA junk bonds) have soared to more than 8% since the start of the year as prices collapse.
-
Ray Dalio’s shrewd $10bn bet on the collapse of European stocksOpinion Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
-
French stocks are back in fashionNews France’s CAC 40 stockmarket index gained 29% in 2021, making it the world’s best performing major market.
-
Has Italy’s economy turned the corner?News Italy’s FTSE MIB stockmarket index has returned 23% so far this year, more than double the FTSE 100’s performance over the same period.
-
Overlooked European stocks are a solid bargainNews The lack of speculative exuberance in European stocks compared to US markets bodes well for investors seeking less tech-heavy drama and more deep value.
-
Too embarrassed to ask: what are negative interest rates?Videos There’s been a lot of talk from the Bank of England recently about introducing “negative interest rates”. So what on earth are they, and what would they mean for your money?
-
The Bank of England should create a "Bitpound" digital currency and take the world by stormOpinion The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
