A look at Gold (XAU/USD) price performance over the past two months reveals some expected behavior but there have also been some inconsistencies during this duration.
Many investors that buy gold usually invest in it as a store of wealth especially during times of economic downturn and for good reason. The price of gold tends to be relatively stable over time compared to fiat currencies. However, it does experience price fluctuations every now and then as market conditions change.
Gold experienced a significant upside especially from around February 4th which is around the same time that the coronavirus cases really started to skyrocket across the globe. The surge in the price of gold coincides with the fiat selloffs as investors respond with the fear over how the coronavirus pandemic would affect global trade.
However, the price of gold saw some massive pullbacks with the first taking place on February 24. This was indicative of the U.S dollar regaining strength after the Federal Reserve announced measures that were aimed at supporting the economy during the crisis. However, the price of gold was back on the bullish wave at the start of March as things continued to worsen.
The dollar’s volatility has been a major force in the value of gold
The above chart indicates another major pullback in the value of gold after the first week of March as the U.S dollar regained some grounds after further economic support measures from the government. However, it looks like the price of gold has been heavily influenced by the U.S dollar’s fluctuations amid Federal Reserve measures such as slashing interest rates to historic lows. The central bank also announced a plan for unlimited treasuries repurchase.
The above measures have largely been responsible for the pullbacks that we have seen in the dollar and thus the change in the value of gold. Large investors or whales that invest in gold have also been moving their money back and forth to leverage the opportunities in recovering dollar prices.