Gold prices dipped below the psychological $1,400 barrier as the tame U.S. inflation data triggered selling – gold has traditionally been a safe store of value and hedge against inflation, reports Tatyana Shumsky for the Wall Street Journal.
“It’s the same set of factors, but they’re coming together at once for an unusual headwind,” George Gero, a senior vice president with RBC Capital Markets Global Futures, said in the WSJ article.
Meanwhile, gold miners continue to underperform. Barrick Gold (NYSE: ABX) saw significant losses after posting worse-than-expected revenue and profits. The Market Vectors Gold Miners ETF (NYSEArca: GDX) has dropped 38.1% year-to-date.
Nevertheless, Tarkak points out that demand out of Asia, notably India and China, is expected to increase, especially as the emerging middle class utilize the precious metal in investments and demand for gold jewelry rises. For instance, since 2007, Chinese demand for gold has increased by an average 27%.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.