The so-called investing safe haven is now more volatile than Bitcoin
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The higher they fly, the harder they fall.
That saying seems appropriate this morning after the most “brutal” selloff in precious metals since the 1980s. And it might not be over yet.
“Those who hoped that Friday’s sharp drop in gold and silver prices … would slow this Monday woke up to another nightmare this morning,” Ipek Ozkardeskaya, senior analyst at Swissquote, said in her morning note.
Precious metal prices had shot to record highs recently in a rally fuelled by concerns about geopolitical turmoil, currency debasement, the Federal Reserve’s independence and quite a bit of market enthusiasm. Gold prices peaked at US$5,600 last week, and silver was up 50 per cent since the start of January to over US$115.
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But that all came crashing down after the nomination of Kevin Warsh for chair of the Federal Reserve, a move that put the starch back in the U.S. dollar.
“I must admit that the sell-off has been far more brutal than I — and many — expected,” Ozkardeskaya said.
The carnage started Friday with gold shedding more than 12 per cent. A decline of that size has only been seen twice since 1975 and was the largest since 1983, said Michael Hsueh, an analyst with Deutsche Bank Research.
Spot gold was down another 10 per cent today, dropping almost as low as US$4,400 an ounce.
Silver’s rise had been steeper, and its descent was record-breaking.
“Silver was down more than 26 per cent on Friday, another 13 per cent this morning, and losses are being printed faster than I can finish my sentence,” said Ozkardeskaya.
The Swissquote analyst said silver has fallen below two key technical levels, suggesting it has entered a “bearish consolidation phase” that could mean deeper losses.
The next key level is a 50 per cent pullback, just below $70 an ounce, “a psychological level that could act as a speed bump and attract dip buyers,” she said.
Gold prices are notoriously hard to predict, and forecasts this morning swung to extremes.
Deutsche is standing by its target of US$6,000, arguing that fundamental support for gold has not changed and conditions “do not appear primed for a sustained reversal.” These analysts expect China to remain a big investor.
Others such as Capital Economics, who believe the gold “bubble” was driven by “market exuberance and a dose of FOMO,” predict even more losses ahead. They forecast that gold prices will fall sharply towards US$3,500 by the end of the year.
It seems a bit ironic that gold, long considered a safe haven for investors, is now more volatile than Bitcoin.
Thirty-day volatility in the precious metal shot up over 44 per cent after Friday’s plunge, the highest level since the financial crisis and higher than Bitcoin’s 39 per cent, according to Bloomberg data.
Since the cryptocurrency was created 17 years ago, gold has only been more volatile twice; the last time was in May when trade tensions spiked over Donald Trump’s tariff threats.
It’s one of the most important — and sometimes confusing — savings decisions Canadians face, and the right answer depends on far more than a simple rule of thumb. Starting today, the Financial Post is launching a week-long series called TFSA vs. RRSP, breaking down the key questions in deciding between the two accounts, including mistakes to avoid and how to get the most bang for your buck. Read the first instalment here and make sure to check back every day this week for more.
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Canada’s economy stalled in November and even a slight rebound in December won’t be enough to keep the fourth quarter from contraction.
Statistics Canada said Friday that gross domestic product was unchanged in November, following a 0.3 per cent decline in October. GDP expanded by 0.1 per cent in December, according to the agency’s estimate, putting the economy on track for a 0.5 per cent contraction in the fourth quarter on an annualized basis.
Considering this “sluggish hand-off,” and uncertainty on the trade front, the economy is not likely to see growth of more than 1 per cent this year, said Douglas Porter, chief economist at BMO Capital Markets.
About a third of Canadians pay a professional to prepare their taxes, and more than 60 per cent of returns are filed by someone other than the taxpayer. Tax columnist Kim Moody explains why automatic tax filing is a good idea, but how Canada Revenue Agency can make it even better for more people. Read on
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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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