The biggest drop in a day for gold in 7 years!

The Spotlight

1 minute read

Aug 13, 2020

chart showing gold and precious metals prices going down for potential investors

A large drop in gold prices due to recent news could be a good entry point for potential gold buyers.

Before we comment on this week's impressive move, let's pause, take a deep breath, and remember this famous Warren Buffet quote:

"The trick is: when there is nothing to do, do nothing."

Now, let's have a look at the chart below, showing the price of gold over the last two months.

chart showing the price of gold hitting its all-time high before its august drop

Impressive, right?

Feels like a rollercoaster!

The market topped shy of $2,080 per ounce before dropping to $1,860 per ounce.

Market analysts seem to see three reasons for this mini gold-crash:

On the same day of the biggest drop, the 10-year US bond had an impressive run-up, shooting back up above 0.6% to end the session at 0.646%.

A lot of the selling seemed to be coming from retail traders attracted to gold by the metal's recent surge.

There is a renewed optimism on the COVID-19 front, with several potential vaccines on the horizon and a decreasing number of deaths in the USA.

Taking a step back, however, one can see that the macro environment hasn't changed much.

The US Bond yield is still in a two-decade-long downturn, as you can see below:

chart showing the evolution of the US Bond yield over the last 20 years

And the big four, namely, the Bank of England, Bank of Japan, the Federal Reserve, and the European Central Bank are still pumping money like there is no tomorrow.

So is this one of those times where we should do nothing, as Warren Buffet advised, or is it just the time to buy cheaper gold than last week? 😎

Gold priceGold

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