Recent gold price weakness explained

London, 10 July 2012

European financial and economic turmoil has plagued markets for more than two years, yet officials have so far failed to find a comprehensive plan to solve the root causes of the crisis. Europe remains mired in deep recession, Greece is effectively in a depression and - despite measures announced at the June G20 meeting -the risk of Spain and Italy becoming overwhelmed by the crisis remains high.

In this environment most "safe haven" assets have performed well, with G-3 bond yields falling to all time lows earlier this year.  The one stand-out exception has been gold, which has performed poorly so far this year.  Gold's poor performance in an environment of high sovereign risk has understandably caused some investors to question its historic "store of value" credentials.

In this note we look at some of the key factors that have driven the gold price in recent years, explain what has been behind the relative underperformance of the gold price so far this year, and assess the outlook and likely key catalysts for gold price performance for the rest of the year.

Gold Price Timeline

Ends --

Research Team at ETF Securities

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