After two unusually high yielding years with a price increase of 18.3% (2019) and 25% (2020), the yellow precious metal is facing negative yields for the first time this year. This is despite the fact that the devaluation of the money supply over the year increased from minus 0.3% (December 2020) to 4.1% (September 2021), which is the highest rate in the last 28 years.
As the pandemic has clearly lost its horror thanks to the progress of vaccinations, and economies in many countries have begun to actively recover, the appetite for risky asset classes such as stocks has increased markedly, and, in turn, the safe haven of gold has lost its appeal in the eyes of some investors.
It should be said that the greatest selling pressure was especially noticeable in the sector of ETF-funds, the shares of which are backed by a physical precious metal.
According to the World Gold Council, the physical holdings of gold ETF-funds from the end of December last year to mid-September this year decreased by 146 tons to 3603.1 tons (-3.9%). In particular, two states recorded the strongest outflow of gold: the United States (minus 173.8 tons) and the UK (minus 26.4 tons), where faith in the reliability of the financial system seems especially strong (for whatever reason).
However, the situation with gold in continental Europe is quite different. The largest inflow of gold into ETFs was observed in Germany (plus 22.5 tons), followed by France (plus 11.5 tons).
According to the American supervisor of the CFTC, only large speculators in gold futures in the first months reduced their long position by 48,000 futures and simultaneously increased their short position by 52,500 contracts, as a result of which their net long position (optimistic balance) was reduced from 268,900 to 168,400 futures (- 37.4%).
Fundamentally, interest rate concerns have been the main reason for the low interest in gold. Most market participants apparently assume that the world's most important central bank, the Fed, could cut bond purchases earlier than expected and then raise key interest rates.
At the last meeting on September 22, Fed Chairman Jerome Powell said that the so-called "tightening" could begin as early as November this year and that the first step on the interest rate could be made in mid-2022.
However, this is only possible if the US economy, and especially the American labor market, continues to develop steadily. However, the global economic recovery does not seem to be proceeding smoothly due to numerous supply bottlenecks in various sectors. As for the upcoming bankruptcy of the Chinese construction company Evergrande, which is mired in excessive debt, it is probably not yet time to declare its de facto bankruptcy.