The latest PM gold fix marked the metal’s fortieth day in a range between $1,600 and $1,700 an ounce, which has some analysts wondering what such a long time idling means for the commodity in near- and long-term trading. A quick statistical check shows that gold trading hasn’t been this static since August/September 2007, and have only had five similar stretches in the last 10 years. That said, more frequent periods of inactivity are recorded further in the past, likely due to gold’s still being tied to the dollar. Analysts suspect the lull could be a sign of one of two things: a quick, big upward shift, like what happened in the 70s, or a long, slow decline, as occurred in the 80s. For more on this continue reading the following article from BullionVault.
We’ve just had the quietest 40 days since the financial crisis began…
The last PM Fix outside this range was on March 5 ($1705 an ounce). Spot gold prices did manage to poke their head above the $1700 mark later that same week, but since then gold has gone pretty much nowhere. Is it common to see such a protracted period of sideways trading?
By the CV measure, gold has not had a quieter 40 days since mid-2007, right at the start of the financial crisis.
As you can see from the chart, these days have tended to come in consecutive blocks – which makes sense since we are taking rolling statistical measures. This allows us to pick out specific quiet periods when gold prices were not really doing much.
The quietest 60-day period so far this year was actually that ended on April 13. Nonetheless, for ease of comparison, here is the chart showing 60-day periods with lower CVs than the period ended Wednesday this week:
- Gold prices have rarely been this quiet since the current financial crisis began
- When the last bull market ended in 1980, it didn’t end quietly – hence the big gaps between the late 1970s and mid-1980s
- If history repeats, these relatively flat gold prices could be a precursor to the Big Move (as was the case in the mid-1970s), or they could herald a long, slow decline (see mid-to-late 1980s)
- Something else happened this week. As my BullionVault colleague Adrian Ash notes, spot market gold prices on Monday ended a calendar month lower for the third month in a row – a rare event indeed in a bull market.
Putting this all together, both bulls and bears could make a case. The bulls might argue that it is just too quiet for this to be the beginning of a sustained downtrend, and that gold prices are taking a breather before making another move up.