Gold Price Suffers Biggest Daily Loss In 2 Years
(April 22, 2024 - Derek Saul, Forbes Staff)
Gold prices suffered a rare tumble Monday, as the surprisingly on-fire asset took a breather, though gold remains among the best investments of 2024 thus far.
Key Facts
Gold futures fell about 2.5% to about $2,350 per troy ounce by late morning trading, heading toward what would be its biggest daily loss since June 13, 2022, according to FactSet data.
Gold prices now sit almost 4% below their all-time high of over $2,400 achieved earlier this month, but they remain up about 14% this year, far outperforming the S&P 500’s 5% return.
Also stumbling Monday was silver, which fell about 5% to around $27.50 per ounce, though silver remains up 15% year-to-date, still sitting near its highest level since early 2020.
The precious metal selloff can be traced to a few factors, including a slight correction in prices following a historic rally seen across asset classes as investors take profits and portfolio managers reposition—and as the S&P headed toward its first positive trading session since April 11.
That’s indicative of investors’ fresh appetite for slightly riskier bets, coming amid a relative lull in Middle East violence over the weekend, a negative catalyst for gold as it’s seen as a “safe haven” asset in times of geopolitical turbulence and high inflation due to its historic storage of value across political regimes, wars and stock market crashes.
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Big Number
54%. That’s how much gold prices rose between September 1973 and October 1974, a period somewhat reminiscent to today’s conditions as the Yom Kippur War between Israel and its Muslim-majority neighbors strongly contributed to higher oil prices and elevated global inflation, Bank of America strategists led by Ohsung Kwon wrote to clients Monday, wildly outstripping the S&P’s 33% loss during the period. But “geopolitical shocks with limited fundamental implications should be bought, not sold,” the Bank of America group added, contributing to the notion that the tensions between Israel and the Middle East may have a less direct effect on U.S. equities and other asset classes than the last two weeks may make it seem.
Key Background
Gold has exploded in value in recent years, with prices up more than 50% since Feb. 2020, just before the full onset of the COVID-19 pandemic, and almost 20% over just the last two months. Unlike most other commodities, gold is largely valued by investors for its strong perception rather than for a specific use case, while gold offers investors no coupon payments, dividends or other avenues to recoup investments that stocks and bonds do. Though the common investor has helped bolster gold prices it’s largely been central banks buying up the metal, with institutional and government buyers in China specifically hungry for gold.
