After reaching a record high of $2,051/oz in early August, gold suffered its largest one-day decline in seven years on 11 August, dropping back below $1,900/oz. Gold has already recovered to $2,000/oz. The bout of profit-taking in gold is short-lived as noted by economists at UBS who believe a bounce towards $2,300/oz is on the cards.
“Gold’s sell-off was driven by a rebound in 10-year real rates after falling to record lows in negative territory. Demand for gold this year has been driven mostly by record inflows to gold exchange-traded funds, so the price reaction was exaggerated and should be seen in the context of the sharp price runup prior to the pullback.”
“In the near-term, gold may move as high as $2,300/oz, particularly if geopolitical tensions rise.”
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