Gold: 5 reasons it is hard to be a bull
|Over the last few weeks, it has hard to be positive about the outlook for gold. The key reasons are:
1. The vaccine inspired sell-off
Look at the way gold sold off on the Pfizer vaccine news. It was the largest loss in gold futures in 7 years and expressed how the market felt about gold post-COVID-19.
2. Outflow in exchange traded funds
These outflows from the spot and the futures markets were matched in the ETF outflows. Remember that ETF inflows had underpinned last year’s gold rally. They are now tailing off.
3. Treasury yields moving higher
Rising yields are just another expression of the recovery story. As US 10 year yields started to rise at the start of the year this lifted the dollar. A stronger dollar (at least relative to last year) was another headwind for gold.
4. BTC hitting above $50,000
Bitcoin’s gain has been gold’s loss. The market capitalisation of Bitcoin was about $190 billion last year. This was in November as it came up in conversation with a UK National Journalist in The Express around the start of the year. See here. The market capitalisation is now over $1.5trillion. The shorthand for me is that it is turning into a ‘digital gold’. That may or may not prove to be accurate in the future. However, it does explain what has happened.
5. Remember GFC
Post the last global financial crisis gold sold off as economies started to recover.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.