By
Mayowa Adebajo
December 4th, 2023
It seems that several factors played against gold recently. With Washington announcing the reach of a partial trade deal with Beijing being just one of them, gold price dropped sharply from its previous highs.
This week, gold has been enjoying a continuous rally, reaching its record highs. On Thursday, it achieved $1,475.50 per troy ounce. Today, the gold price has dropped sharply, with markets suffering losses globally.
The volatility of the precious metal’s price results from several factors.
Firstly, in October, Serbian President Aleksandar Vucic recommended Serbia’s central bank to increase its gold reserves in order to protect against economic issues and financial uncertainty. Following the advice, the bank added nine tons of gold, which cost the institution $434.3 million (or $1,503 per ounce). Now, Serbia owns 30.4 tons of gold and joins Russia, Poland, and Hungary that decided to protect its economy against risks in such a way earlier.
Secondly, the trade war between the US and China led to the decline of the US income flow, which also resulted in an increase in the gold price. As there are worries about the trade relationship between the two countries, gold prices are up 14% this year.
As Kitco has reported, Scotiabank discovered that investor inflows best correlate to gold price fluctuations out of the combined demand fundamentals that include jewelry, central bank buying, and investor demand. And based on this, plus the high demand from central banks and investors in 2019, gold should have gained 26%.
Thursday became the crucial moment in gold price movements. Until yesterday, December gold futures were rising, with prices surpassing one-week highs. By the way, silver kept pace with gold, increasing in price and trading $17.00 per troy ounce on Thursday. Gold’s premium over silver rose 0.2% and made up 86.33.
Troughs After Crests
Today, the situation is totally different. India has reported a sharp fall in gold and silver prices. Gold futures have lost 0.5% to $1,466.45. Currently, gold trades at $1,465.20 per ounce, and silver makes up $16.86. This came after the statement made by White House economic adviser Larry Kudlow about Washington being close to reaching a partial trade deal with Beijing.
Chinese Ministry of Commerce spokesman Gao Feng confirmed that at the moment, the two countries are discussing a deal. Following these comments, Asian stock markets are mostly higher.
It is quite difficult to predict metals’ price movements in the nearest future, as it depends on a number of factors, the relationship between the US and China is one of the major ones. Anyway, gold prices are up 14% this year, which demonstrates that there is a demand for gold in the past and present, and well into the future.
