Gold Prices Near $US4600: Is It Time to Buy?

In February, gold reached an all-time high above $US5600 an ounce, capping a 12-month run of more than 80 per cent. However, six months later, the price had dropped to near $US4600 and investors were questioning why their 'safe haven' failed them during the Iran war.

The author, Justin Lin, suggests that gold's disappointing first half was not due to any fundamental flaws in the asset but rather the consequences of its own success. When an asset rises rapidly, it attracts speculative buyers who are quick to exit when prices peak.

Additionally, during the Iran war, markets priced in a central bank forced to stay tight or even hike interest rates, which made gold more expensive to hold and negatively impacted its price.

The author argues that despite these headwinds, the core investment case for gold remains strong. Central banks have been accumulating gold as a deliberate act of diversification away from the US dollar, and Asian investors have proven committed to buying gold.