Oil Price Collapse Sparks Brief Gold Rally Before Reversal
The gold price saw a brief gap higher at the start of the week, rising above $4,106 before reversing to trade around $4,075 by the end of the New York morning. This volatility was mirrored in other assets, with the S&P 500 and Bitcoin experiencing similar whipsaws.
The weekly context suggests that this reaction is less surprising, as gold has recently experienced a violent seven-day stretch, with prices spiking above $4,160 and then sliding towards $4,000. The one-month range for gold remains relatively contained, from around $3,962 to $4,200.
Performance metrics tell a more positive story, however, with gold up 2.44% over the past week and 1.96% over the past month. But year-to-date, it's down 5.67%, and up only 22.94% over the past twelve months, indicating an asset that has peaked and is correcting.
The key driver behind Monday's price action was the collapse in oil prices, which fell as much as 7.4% to $87 a barrel. This triggered a risk-on inflation-relief trade, with gold initially rallying before surrendering to the lower oil premium.