Gold strength is likely intact, even with volatility

[SINGAPORE] Just when you are lulled into thinking gold’s trajectory is unstoppable, its price suddenly plunged by more than 6 per cent on Tuesday (Oct 21), its steepest drop in more than a decade.

Various reasons have been proffered for this, such as a recent rebound in the US dollar; a more positive tone to US-China tensions; and possibly India’s shutdown for Deepavali which is thought to have drained the market of liquidity.

There is, to be sure, yet another explanation. Gold has climbed an estimated 25 per cent in the past two months alone. Year to date, until the year’s high of US$4,359 per ounce on Oct 20, it has shot up by an eye-popping 65 per cent. Clearly, especially for investors in liquid gold-backed exchange-traded funds (ETF), it was opportune to take some profits.