Gold Holds its Ground

Not since the beginning of the COVID-19 pandemic has the price of gold been so stable. Gold has traded in a tight range between $1,900 and $2,000 an ounce since mid-May, putting the six-month measure of gold price volatility at its lowest level in more than three years.

Gold has held its ground above $1,900 in spite of factors that normally would weigh against the precious metal. U.S. Treasury bond yields have surged in recent months as the economy has shown resilience in the face of Federal Reserve interest rate hikes. Higher rates can lure some investors away from gold, which, of course, pays no interest. As interest rates have climbed, the U.S. dollar has followed, up more than five percent from mid-July through mid-September. Since gold is denominated in dollars, a rise of that magnitude can lead to a drop in demand as gold becomes more expensive for international buyers.

Yet none of these factors has significantly impacted gold this year. Every time the precious metal dips towards $1,900, buyers step in to support gold. Apparently, many investors who built up their gold holdings during the pandemic do not want to sell, even in the face of rising interest rates. Also supporting the gold price, are central banks which have been strong buyers of gold in 2023 as they try to strengthen the stability of their economies.