Gold prices record worst start in 30 years
Gold entered 2021 with lofty expectations on the back of a record high and its biggest annual gain in a decade. Instead, the precious metal is off to its worst start in 30 years.
The metal, which surged last year on pandemic-induced haven buying, low interest rates and stimulus spending, has dropped more than 6 per cent in 2021, the worst performance on the Bloomberg Commodity Index. It’s suddenly facing a host of unexpected stumbling blocks.
With “rates going higher and inflation expectations peaking out, we’re seeing a lot of profit-taking in gold and people are going from gold into industrial metals such as copper,” said Peter Thomas, senior vice-president at Zaner Group in Chicago. “It’s a perfect storm.”
The 6.7 per cent decline in spot gold in 2021 is the worst start to a year since 1991, according to data compiled by Bloomberg. A gain in 10-year Treasury yields is weighing on demand for non-interest-bearing bullion, with the metal extending losses after forming a so-called ‘death-cross pattern’ earlier this week. Yields on 10-year Treasuries climbed to the highest levels in about a year this week.
Gold could still mount a comeback. Goldman Sachs Group Inc. analysts led by Jeffrey Currie said in a note that with prospects for additional stimulus and Federal Reserve interest rates on hold, the metal “remains a compelling investment for the medium-to long-term investor.” That’s even as near-term dollar strength could present a hurdle, the bank said.
