The price of gold temporarily dipped below $1,800 in a volatile move for precious metals. However, gold prices have started to trend upward again despite assets like silver, platinum, and palladium continuing to struggle.
Here’s why gold is experiencing price volatility and whether its value will recover after swiftly going down.
Gold temporarily dips below $1,800 per ounce amid sanctions on Russian gold.
Gold fell below $1,800 per ounce on Friday, July 1 in a volatile moment for precious metals. This is well below the asset’s recent peak in March at more than $2,040 per ounce. Comparatively, silver is at its lowest level in two years while palladium ends the week about 40 percent lower than its March high.
For gold, the outflow comes as the EU and U.S. place sanctions on Russian gold, an attempt to increase financial pressure on the already debt-ridden nation. As Russia intensifies its war on Ukraine, western nations are synchronously intensifying their sanctions to cripple the Russian economy. Russia fell into debt default earlier this week and the punishment is inevitable. Russia’s gold output is reportedly the second largest in the world, so sanctions on its gold industry can do a lot of damage.
Will gold recover to full strength?
Gold didn’t stay below $1,800 per ounce for long, but its value is still in the trenches compared to previous pandemic-era peaks. Gold is still considered a safe place during times of high inflation (the cost of living in U.S. cities is up at least 8.6 percent in the last 12 months) while investors are exiting other, more volatile assets.
Investors can see this trend in asset-backed ETFs. Gold ETFs are down 1 percent for Q2 2022, according to Bloomberg, while silver ETFs are down 5 percent. “The amount in gold ETFs is the lowest since March, while assets in the other three precious metals are around the smallest since 2020,” says reporter Ranjeetha Pakiam.
Will gold recover? It's a "when" and not an "if."
In April, Rick Rule of resource investment media firm Rule Investment Media said, “Higher gold prices is a when question, not if. They don't go higher, they go much higher. They represented [1.5–2 percent] of the market share in 1980, today they're one-half of [one percent]...if they merely revert to the mean I believe demand will triple or quadruple. I see that happening.”
Right now, gold is averaging approximately where it ended last year. Bank of America’s prediction for gold in April sat at 7 percent above the 2021 levels, while Blackstone says it could surge 20 percent over last year’s end.
Gold will likely strengthen if inflation remains high. Unlike cash, gold can act as a protective hedge to avoid losing value on your money over time. An uncertain near-term economic future puts gold price predictions all over the map. However, gold will likely go up as it historically has — though it may or may not be this year.