Gold drops sharply in concert with steep sell-off in global financial markets
In Shanghai, gold trades at a $43 premium over London pricing

(USAGOLD – 9/23/2022) – Gold dropped sharply in concert with a steep sell-off in global stock, bond, and commodities markets. It is down $26 at $1647.50. Silver is down 60¢ at $19.14. News services attribute the broad sell-off to deepening investor concerns over the possibility of a global recession combined with stubbornly high inflation. Globally, investors continue to add to their physical precious metals holdings for defensive purposes despite (or perhaps because of) the ongoing drop in prices. On China’s Shanghai Gold Exchange, the physical metal is selling at a $43 premium over London pricing, according to a Bloomberg report posted overnight – a reflection of strong demand.

“Many of the investors we talk to,” says the World Gold Council’s Juan Carlos Artigas in a market note released yesterday, “feel that gold’s performance should be much stronger considering multi-decade high inflation across the world. Yet, what may not be evident to everyone is that gold has outperformed most major assets so far in 2022. In fact, gold has done much better than inflation-linked bonds both in the US and elsewhere.” Artigas goes on to say that US rate hikes are likely to slow down while other central banks become more resolute in defense of their currencies opening the door to a weaker dollar. “As recessionary and geopolitical risks increase,” he concludes, “investors may shift to more defensive strategies, looking for high quality liquid assets such as gold to reduce portfolio losses.”

Comparative investments
(%, year to date)
overlay line chart showing comparative investments year to date
Chart courtesy of Trading • • • Click to enlarge
SPGSCI = Standard & Poors Goldman Sachs Commodity Index; TIPX = TIPS Index; SPX = Standard & Poors 500; TLT = Treasuries ETF

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