It is a mystery worthy of the talents of Sherlock Holmes. In short, what is supporting the gold price?
Not only has it barely budged during the past month, or past three months or even the past year.
It is much where it was five years ago.
Ups and downs
Rookie financial journalists have for years been taught that the price of bullion is influenced by a small number of factors, which makes it easy enough to predict where it is likely to go next. But the events of recent times suggest that the old rules may have been scrapped or at least suspended.
More on that in a moment. First, the numbers themselves.
Go back a year, to 30 May 2018, and it was changing hands at $1,298.60.
So, the difference between the price a year ago and the price today is just $15.10 or just 1.2% of today’s price.
The difference between today’s price and that five years ago, on 30 May 2014, when it stood at $1,298.60 an ounce, is scarcely more spectacular – 2.3%.
Now, it is true that there have been ups and downs during that period, with a low of $1,055.25 on 18 December 2015 and a high of $1,362.60 on 5 August 2016. But even there, the gap between top and bottom, at $307.35 an ounce, is 24%. Not insignificant, but hardly indicative of demented levels of volatility, not least because that up and down movement was concentrated in the fairly narrow period of 2015-2016.
Running out of suspects
Even were you to be a sore loser who either sold or bought at the wrong time, the fact remains not so much that the gold price has held steady across the whole of the last five years, but that it has done so for little obvious reason.
What do the textbooks tell us about gold-price movements?
This is what the International Monetary Fund (IMF) had to say in its World Economic Outlook last month on the subject of global inflation: “Consumer price inflation remained muted across advanced economies, given the drop in commodity prices.”
So, that’s one suspect off the great detective’s list. The other “name on the frame” over the years has been geopolitical instability and the threat of conflict.
Now, it is quite possible that gold is being supported at the moment by fears of a US-Iran war or a flare-up between America and China. It is similarly possible that, back in 2014, the tensions created by the Russian invasion of Crimea bolstered the price.
But its general steadiness over five years is more difficult to explain.
This leaves just one suspect, the “quantitative easing” (QE) money-creation schemes of the Federal Reserve, the European Central Bank, the Bank of England and Bank of Japan, which have totalled more than $14.5 trillion. QE has not shown up in consumer prices, but it has inflated asset prices, including, perhaps, that of the asset of last resort – gold.