Gold Loses Its Shine

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The pandemic was a game changer for gold as it pushed uncertainty to extreme highs, leading to strong investor demand and a temporary constraint over supplies. Gold futures trading on COMEX faced delivery shortages of 100 oz bars, which pushed the premium between the futures and physical London spot gold prices to record highs. This prompted the exchange to launch a new contract where 400 oz bars could be delivered in an attempt to alleviate the physical supply bottlenecks and shortage fears.

However, according to the World Gold Council, demand hit an 11-year low later in 2020 and the last quarter of the year was the weakest for demand since 2008. The rally in gold was therefore largely driven by its safe haven status due to Covid-19 uncertainty.

 

Gold Loses Its Shine

Source: Unigestion, Bloomberg, as of 31 May 2021


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