GOLD’S reputation as a haven asset had come under scrutiny after prices declined about 12% following the outbreak of conflict in the Middle East. But the metal’s long-term status was intact and prices would test record highs again, said Suki Copper, global head of commodities research at Standard Chartered in the Financial Times.
The recent decline in the metal’s price reflected short-term liquidity dynamics rather than a structural shift, said Cooper in an article for the newspaper.
During periods of market stress, investors are forced to sell assets to meet margin calls, and gold – one of very few assets that can be liquidated without crystallising losses – tends to bear the brunt of such selling. Historically, this process weighs on prices for four to six weeks before investors rebuild exposure, she said.
The sell-off was also a function of how elevated gold had become. Prices hit record highs in January, pushing exchange-traded products to new peaks. The premium of spot prices over the 50-day moving average reached levels last seen in 1999 before reversing sharply; gold has since moved from overbought to oversold territory.
In the near term, the gold price appeared to be taking its cue from US interest rate expectations, said Cooper. Net redemptions from gold ETPs in March were on track for the steepest monthly decline since September 2022, suggesting a shift away from haven-driven buying, though the pace of liquidation has begun to slow, she said.
Central bank demand, a key structural support, also continued. Net purchases reached 863 tons last year, down from more than 1,000 tons previously but still at record highs in dollar terms. Gold was not yet pricing in recession risks or stagflation fears – both historically positive catalysts. In addition, the metal’s 200-day moving average, unbroken since October 2023, provided a firm price floor, said Cooper.
