The price of gold has fallen for six consecutive months, after hitting a peak in March - raising questions about its status as a safe haven investment and a hedge against inflation.
The gold price took off at the end of January, running up 14.7 per cent from US$1789 an ounce on January 30 to a peak of US$2052 on March 8 (not long after the onset of the Ukraine war).
Since then the price movement has been volatile, with an overall downward trend. It hit a low of US$1627 an ounce on September 26 before recovering to its current level of around US$1700.
It has fared better in other currencies but the overall trend has been similar. The Australian dollar price peaked at A$2800 an ounce on March 8, hit a low of $2476 on July 26 and is now trading around $2660.
Gold may have safe haven status and provide a hedge against inflation but it is also sensitive to rising interest rates, particularly US bond rates. Rising bond yields increase the opportunity cost of holding non-yielding bullion and put downward pressure on its price.
The appreciation of the US dollar against most other currencies this year has also had an impact, giving investors another safe haven option.
The US dollar gold price fell 2.6 per cent in September, which is not as big as the falls in global equity and bond markets last month.
The World Gold Council described this performance as “resilient” and said its “relative outperformance” made it a good diversifier in investment portfolios, but it did acknowledge that gold has not been the crisis hedge it has been in the past.
The increase in the number of gold exchange traded funds in recent years has changed the dynamics of gold pricing. ETFs give investors access to gold in a liquid form and the buying and selling of gold ETFs has become a big price driver.