Events in the market have given a whole new twist to the old adage that “no news is good news.”
Hopes for a deal between the US and China to dismantle the trade tariffs imposed on each other’s exports have cheered most observers, given that a serious clash of these economic titans would spell serious trouble for mid-sized and smaller economies.
But in the bullion world, optimistic noises about an end to the trade conflict were greeted by a markdown in the gold price.
Traders cool on safe havens
Also taking the shine off gold as an asset class were suggestions that Britain may be able to sign a Brexit deal in the near future and that tensions in Europe between France and Italy are easing.
These include the fact that it produces no income, unlike shares or bonds, and that storage and security have to be paid for.
Gold is currently trading at down 0.19% at $1,285 an ounce, against $1,314.20 on 5 February and £1,235.90 three months ago, on 5 December.
On 5 March last year, it traded at $1,320.40.
Its recent weakness is largely unrelated to any surge in strength of its traditional rival as a rock-solid asset, the . On 2 March, President Donald Trump appeared to be talking the currency down, in order to keep US exports competitively priced.
He criticised the country’s chief central banker, the Federal Reserve chair Jerome Powell, but without naming him.
Sterling price also weakens
"I want a strong dollar," Bloomberg reported him as saying at a Conservative Political Action Conference, “but I want a dollar that does great for our country, not a dollar that's so strong that it makes it prohibitive for us to do business with other nations and take their business."
The dollar has barely moved in relation to the euro in recent months, having traded at €0.877 on 5 February and €0.8815 on 5 December.
In other words, weakness in gold is more closely related to market sentiment as to its prospects rather than reflecting dollar strength. When economic skies seem to be brightening, traders and investors tend to become more adventurous, seeking out riskier assets that offer better returns.
Gold’s relationship with the dollar is traditionally complicated. Not only is the US currency the universally recognised denomination for pricing bullion, but until the early Seventies, the gold price was fixed in dollars.
But its sterling price has also been under pressure recently. Currently £981.75 an ounce, it stood at £1,008.57 on 5 February and £972.64 on 5 December.
London remains the world centre for over-the-counter trading in bullion, and the London gold fixing is still held twice a day, during which five major banks in this area work out the balancing price of supply and demand.
No-one is obliged to deal at the “fixed” price, although it can be cited in various contracts.