Gold weakens in early trading on recession fears
Gold’s strong YTD performance, says WGC, proves it’s an effective diversifier

(USAGOLD – 4/1/2022) Gold weakened in early trading as yields inverted on 10-year and 2-year Treasuries – a circumstance that has signaled the start of a recession in the past. It is down $7 at $1932. Silver is down 9¢ at $24.76. With inflation already running at high levels, analysts fear the beginnings of a stagflationary recession similar to what occurred in the 1970s. The World Gold Council pointed out in a recent report that “Of the four business cycle phases since 1973, stagflation is the one that is most supportive for gold and conversely the worst for risk assets.”

Gold price
(%, year to date)

Chart courtesy of TradingView.com

“Gold’s strong performance year-to-date,” it continues, “might be following its historical track record in reflationary environments, lagging commodities initially but eventually catching up. The Ukraine crisis has undoubtedly focused more attention on gold’s hedging credentials. Whatever the motivation for the current widespread interest in gold, it is doing exactly what an effective diversifier and portfolio hedge should: providing protection when other assets are faltering. What may also be benefiting gold here is the lacklustre performance of bonds.”