The World Gold Council has reported that the price of gold fell by over 3% on October 4.
Following a remarkable performance year to date, the gold price fell by 3% this week, taking it below US$1,300/oz for the first time since the Brexit announcement in June.
The report suggests the move has been driven by speculation of a scaling back in the ECBs asset purchase programme, combined with rising expectations of a US rate hike in December. The move was exacerbated by technical levels, tactical positioning in derivatives markets and a national holiday in China.
Looking forward, the World Gold Councils believes the price dip will offer a good buying opportunity for consumers and long-term investors. In addition, the broader market environment of ongoing low and negative interest rates, coupled with continuing political, economic and policy uncertainty remains unchanged, and are generally positive for gold.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council, states: “The recent price movement in the gold price represents a good buying opportunity for many retail investors who have been sitting on the sidelines, waiting for exactly this type of pullback prior to entering the market. We have seen the same pattern in response to brief price dips in Q3 and Q4 2015 which triggered an uptick in bar and coin demand in the US, Europe, China and India.”
“However, gold cannot be viewed purely in the context of its price performance, particularly as its role in a portfolio extends to being a hedge against all sorts of risks. Gold has had a record year in 2016 with the strongest H1 rise since 1980 but to better understand gold’s price performance, it is key to consider not only temporary economic developments, but also the importance of gold’s long-term dynamics.”