PRESS ROOM
Gold’s retreat in September reminiscent of March
Monday 28th September '20
After rallying to new highs on 6th August 2020 of over US$2070/oz intraday, gold prices have fallen close to 10% by September 28th 2020. Year-to-date, gold is still up over 22% and most importantly it is one of the very few assets posting gains during the worst of the COVID-19 pandemic driven crisis. The recent drawdown of gold comes at a curious time when inflation expectations are rising, the US dollar has been weak and when we haven’t really escaped the economic uncertainty that the COVID-19 pandemic has brought about. The cyclical market drawdowns we have seen in the past month may be placing downward pressure on defensive assets like gold and Treasuries, just as we saw back in March 2020. At that time investors were redeeming liquid assets due to pressure in other parts of their portfolio. If gold is viewed as only a defensive asset, then a cyclical recovery may hurt prices. However, historically gold has not just been a defensive asset. Its price tends to rise with inflation which is generated during periods of stronger economic growth. So long as recovery is not met by an aggressive tightening of monetary policy, gold is likely to do well.