Analysts at Fidelity cite two factors as the main reasons behind the disappointing results for many investors in the gold market:

1. Aggressive statements by the US Federal Reserve

“The expectation that the US Federal Reserve would act aggressively enough to bring inflation under control paralyzed the price of gold,” writes Graham Smith, an investment analyst at Fidelity. “The prospect of further increases in US interest rates increases the relative attractiveness of the dollar compared to tangible assets such as gold, which do not earn interest. It would then take less dollars to buy one ounce of gold, which would lower the dollar price of gold.”

2. Speculation on Russia's gold reserves

According to him, the gold reserves of the Russian Central Bank are one of the few assets not affected by Western sanctions against Russia after the start of the military conflict on the territory of Ukraine. “Given that a significant portion of Russian assets have been frozen, there is always the possibility that some of the gold, estimated at about $140 billion, could be sold to make payments,” Smith said.
However, according to him, the investment environment remains attractive for investing in gold. Here, Smith points to the military action in Ukraine, the economic slowdown in China, high inflation, and a volatile stock market.
His conclusion is: “The long-awaited big price rally in the gold market may be yet to come. The price of gold - currently at $1,900 an ounce - has at least shown some stability since the beginning of the current 2022. Maybe gold just needs a little more time. Weak stock returns have been worrying investors lately, and a lack of improvement could lead to a move to other asset classes. It is also worth remembering that the yellow precious metal is always able to protect investors in the event of unexpected turns in the world of a different nature.”