Gold and platinum aren’t so shiny anymore

Not worth what it used to be.
Not worth what it used to be.
Image: Reuters/Nir Elias
We may earn a commission from links on this page.

Precious metals are losing their shine.

Despite turmoil in emerging market economies and a burgeoning US-China trade war, the metals that traditionally serve as haven assets haven’t attracted the influx of money you may expect.

Last week, gold prices fell to their lowest level since January 2017, and continue to languish below the psychologically important level of $1,200 per troy ounce. So far this year, prices have fallen by 9%.

Analysts pin most of the blame on the dollar. Its unexpected strength this year has usurped the yellow metal as skittish investors’ preferred haven asset. Meanwhile, higher US interest rates also make gold less appealing, because it offers no yield.

Net positioning in gold turned short last week for the first time in 17 years (paywall). The balance of traders, in this case hedge funds and other large speculators, are now betting that the price of gold is more like to decline than rise, a strong signal about sentiment in markets.

Global demand for gold in the first half of the year was the lowest since 2009 and, according to Bloomberg data, gold-backed exchange-traded funds have been shedding assets for 13 consecutive weeks, the longest such run in five years.

And it’s not just gold. Platinum is suffering, too, recently falling to its lowest level in since late 2003. Gains in the dollar have sparked a selloff in emerging market currencies, including the South African rand. South Africa is the largest producer of platinum, and as the currency depreciation boosted the local earnings of producers—whose costs are in rand and revenue is in dollars—it has reduced their incentive to cut output, Reuters reports. This has worsened the oversupply of the metal, putting even more downward pressure on prices.

The odds of a turnaround in these metals looks slim; net positioning in the dollar (paywall) is now the most bullish it has been in some time.