Gold price sinks to post-pandemic low. What's going on?

Investors look to be chasing yield over the defensive qualities of gold. Recall, gold doesn't pay interest.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • Gold continues its downside run and now trades at 52-week lows 
  • Investors have shied away from the yellow metal amid a number of macro catalysts, including US dollar strength and rising interest rates 
  • The Vaneck Gold Miners ETF is down almost 3% today 

Gold continues its downward spiral and now trades at 12-month lows. The yellow metal has catapulted down from a previous high of US$2,052 per troy ounce and now rests at US$1,692/t.oz.

Meanwhile, economic data continues to defy the last few decades of readings.

US and UK inflation is now over 9% year on year, whereas the risk of recession increasingly grows by the week.

Traditionally, these have been bullish drivers for the gold price, but these relationships have fallen apart at the seams in 2022.

A man sits wide-eyed at a desk with a laptop open and holds one hand to his forehead with an extremely worried look on his face as he reads news of the Bitcoin price falling today on his mobile phone

Image source: Getty Images

What's going on?

In order to curb the hot-running global inflation, central banks have embarked on aggressive monetary tightening regimes.

This has dented global demand for gold bullion, Trading Economics says. It notes the metal's underperformance "indicated technical weakness" despite other headwinds receding.

"[This] could be attributed to expectations that other major central banks will catch up to the Fed's tightening path," it said.

Gold is traditionally seen as a hedge against inflation. However, rising interest rates mean investors weigh up the opportunity cost of holding gold bullion/futures, as neither pay any interest.

Meanwhile, the US dollar index (DXY) continues to defy the odds and has surged to its highest value in 5-years.

As seen below, gold has diverged away from the DXY from May, and the 'crocodile jaws' continue to widen at the time of writing.

TradingView Chart

"The US dollar held below two-decade highs against its rivals, making greenback-priced bullion more expensive for buyers holding other currencies," Reuters reported.

Not only that, but European Union diplomats met on Wednesday to discuss a new round of sanctions against Russia, including banning gold imports from the country.

Alas, the gold price continues in a sharp downtrend that has yet to find a bottom. ASX gold miners have felt the pinch today as well, with the Vaneck Gold Miners ETF (ASX: GDX) down almost 3%.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Gold

Happy miner giving ok sign in front of a mine.
Gold

Guess which ASX gold stock is edging higher today on drilling news

The miner has delivered first ore from its Deacon North underground mine.

Read more »

A female athlete in green spandex leaps from one cliff edge to another representing 3 ASX shares that are destined to rise and be great
Gold

Guess which ASX 200 gold stock is leaping higher today on big expansion plans

The ASX gold stock is looking to ramp up its Western Australian operations.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Gold

Why are shares in this small-cap ASX gold company charging higher?

This company's gold project is stacking up nicely.

Read more »

Two excited woman pointing out a bargain opportunity on a laptop.
Gold

Up 120% since July, guess which ASX 200 gold stock is charging higher again on Monday

Investors are piling into the outperforming ASX gold stock on Monday. But why?

Read more »

A photo of a wet dirty hand picking up a piece of gold amongst black rocks
Gold

This ASX gold stock is down 15% in a month. Here's what just happened

Catalyst investors have more drilling results to digest.

Read more »

A man in a suit looks surprised as he looks through binoculars.
Earnings Results

Guess which ASX 200 stock is dropping despite record quarterly profit

It was a record-breaking quarter for this company.

Read more »

A graphic showing a businessman running up a white upwards rising arrow symbolising the soaring Magellan share price today
Gold

Up 572% in a year, why is this ASX 300 gold stock rocketing again on Friday?

This ASX gold stock has turned a $10,000 investment into $67,188 in one year. And it’s surging higher again today.

Read more »

Woman with gold nuggets on her hand.
Gold

Why ASX gold miners Evolution Mining and Northern Star could keep shining in 2026

Evolution Mining and Northern Star have been great performers these last years. Here's why they can continue growing well into…

Read more »