Skip to navigationSkip to content
Twenty four karat gold bars are seen at the United States West Point Mint facility in West Point, New York.
Reuters/Shannon Stapleton
Losing its luster.
TEST OF METAL

Sadly for gold investors, all news is currently good news

By Jason Karaian

This chart has tongues wagging in the markets today:

In early Asia trading, the gold price dropped suddenly and sharply, setting a new five-year low. Was it an accidental “fat finger” trade or an algorithm run amok? Analysts don’t think so, because aside from whatever technical reason is behind the unexpected plunge today, it merely extends the precious metal’s long streak—gold is down by around 40% from its 2011 high:

What gives? Gold is generally considered a safe-haven asset during times of turmoil, so signs that things are picking up–particularly in the US—is the most commonly cited factor in the yellow metal’s malaise.

With the US Federal Reserve poised to hike interest rates later this year on the back of better economic news, the dollar has been on a tear lately. The gold price typically moves inversely to the dollar.

Other factors working against gold are the revelation that China’s central bank hasn’t been buying nearly as much of the metal as markets expected; the prospects for a nuclear deal with Iran reducing global tensions; and a resolution, of sorts, to Greece’s bailout negotiation saga. The fears that often drive gold buying—of economic calamity, soaring inflation, or armed conflict—seem to have subsided. For now.

Gold bugs can be a cynical bunch, decrying the folly of investors dumping their holdings and punishing the miners that dig up the metal. Renewed disaster is always just around the corner, they say.

But as a fund manager explained to Bloomberg, “the market is in one of its bear phases, where any news is bearish news.” Or as churlish market watchers often put it, the one thing we can be sure of is that there are more sellers than buyers.