Both bullion bulls and bears can take comfort from recent trends in the gold price – provided they look at the right chart.
Today’s trading so far has not been encouraging, as the price is down 0.19% at $1,217.70 a Troy ounce.
But seeing the monthly picture, that price is an improvement on the $1,185.30 seen on 1 October.
Price points don’t tell full story
Alas, the trend during the last three months would seem to offer more cheer to the bearish tendency. was trading at $1,22.75 on 1 August.
There is more gloom for gold-bugs from the picture during the last year. On 1 November 2017, the price stood at $1,279.25.
One final time-machine trip, back to 1 November 2013, when the gold price was $1,314.75.
On the face of it, the yellow metal has seen a slow but steady decline in price over five years, losing nearly $100 an ounce, or 7.4%.
So, fans of gold bullion as an asset class would probably be well-advised to keep their eyes fixed on the monthly price chart, wouldn’t they?
Not so fast. Taking the price at certain fixed points, as we have just done, tells us something, but it’s far from the full story. Making sweeping generalisations about the prospects for gold using these price points is no more sensible than trying to find your way around city streets using a map of the underground railway system.
Yes, the map will give you some idea of where everything is, but a lot will be left out.
But the price came close to that much later in the period – on 8 July 2016 ($1,356.1), on 8 September 2017 ($1,350.9) and on 16 February this year ($1,358.60).
The 16% “corridor”
What about the lows? The trough to date for 2018 came on 17 August, when the price touched $1,176.70. But this was some way above 2017’s low point of $1,131 on 23 December.
Over the five-year period, the lowest point was seen back on 18 December 2015, at $1,055.25. In other words, the five-year trough for bullion prices occurred not towards the end of that period, which is what you would expect were the price to be caught in an unstoppable slide, but somewhere in the middle.
Over five years, the “corridor” within which the gold price has moved has amounted to just over $190. That is about 16% of today’s price. Whether you find that daunting or, by contrast, an example of low volatility is largely a matter of temperament.