Let's list the main ones. Bitcoin in two summer months managed to drop in price from 37 to 29 thousand dollars, and then rise again to 40 thousand dollars. Shares of Chinese companies, which are listed in the United States, have tumbled to 13-year lows. The yield on 10-year-old US treasuries fell from 1.7% to 1.3%. The United States has recorded a record inflation rate since 2008. Against this background, the gold rate unexpectedly closed in a narrow range. What is the reason for this strange behavior?
From a historical point of view, summer for the yellow metal passes without much upward dynamics. Not least this is due to a decrease in consumer demand in China and India after the holidays and wedding season during the first five months of the year. Over the past 7 years, the precious metal rate dropped four times, or was in a narrow range, until the end of July, namely, in 2015, 2017, 2018, 2021, and the rally was recorded in 2016, 2019, 2020. In all cases, the sharp rise in prices is explained by the intensification of geoeconomic and geopolitical instability: Brexit and the risk of war between the United States and North Korea in 2016, fears of an economic downturn and lower interest rates in the United States in 2019, the global coronavirus crisis in 2020 (see graph below; filled pointers - summer downtrend).
In the current year 2021, despite the growth factors, the gold rate is depreciating due to the following reasons. First, the pandemic is partly brought under control in Western countries thanks to mass vaccinations. Secondly, the authorities of the leading countries continue to inject trillions of dollars into the economy. Third, the Fed warned of the possibility of raising interest rates in 2023, but this could happen earlier if the rise in inflation turns out to be too rapid. Fourth, investors are encouraged by a large rally in the stock markets, therefore they are confident in an early recovery of the global economy. Consequently, the factors contributing to the growth of the gold rate function in conditions of economic optimism.
When will the gold rate resume its upward trend? If the geoeconomic situation develops purely in favor of the precious metal, then the rally will not be long in coming. For example, a "financial bubble" inflated by economic incentives may burst, and the next wave of a pandemic will be more threatening in its consequences. Under such circumstances, investors will be cautious, and in their eyes gold will become more attractive than traditional assets.