The price of gold is troubling analysts.
A few days ago it dropped below $ 1800 an ounce and this value is not just any value because it constitutes the minimum of the year.
$ 1800 an ounce is an oddly low price according to analysts. Only a few months ago the yellow metal had risen to over $ 2,000 but since early March it has lost about 11%.
Elements of weakness of the yellow metal
This is a significant but not so dramatic decline. The real fact that worries analysts is another.
A technical deviation on the value of gold held by the Bank of England has made more than one financial analyst jump in his chair. According to the most accredited reconstructions, some central banks in the world are putting in place a big sale of gold. It is not currently known what this central bank is, but according to many analysts at least one central bank it is shedding substantial amounts of gold and likely others may follow. Let’s try to understand why central banks should sell gold at this stage.
Maybe there are sales of the reserves
Central bank gold sales may be due to the need to make cash or maybe they are due to other less demanding reasons. But there is also another reason to make analysts think that gold is starting a period of decline. The rate hike decided by central banks and above all the Federal Reserve is changing the cards on the table as regards gold. As we know central banks have the power to stem high inflation.
Monetary tightening makes bonds more attractive
The Federal Reserve has proven itself very reluctant in recent months to raise rates but now it’s going in that direction. Consequently bonds become more attractive and compete with gold. This is definitely something truly paradoxical because in a moment of strong international economic uncertainty like what we are experiencing, gold should shine as a safe haven asset par excellence. Yet central bank monetary tightening could actually put it in difficulty. But of course, nothing is taken for granted. The war and the food crisis are very strong unknowns and whether the stock markets continue to fall as they are doing and the nervousness increased, gold would immediately become the protagonist again.
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