Gold is facing tough competition this year as the preferred haven for cautious investors.
Gold prices settled at $1,831.80 per troy ounce on Thursday, its lowest close since March. That comes after the price of the precious metal has declined over the past few months, with the selloff accelerating in recent weeks due to a surge in yields and the dollar.
Investors tend to prefer government bonds over gold when yields are high, because they offer regular coupon payments. A rise in the greenback's value makes it costlier for foreign investors to purchase gold, whose price is denominated in dollars.
Gold prices leapt to a near-record high earlier this year, as collapses of several US regional banks and sticky inflation led investors to seek refuge from market turmoil. Investors also bet that a banking crisis would lead the Federal Reserve to pivot from its interest rate hiking campaign, a move that could also boost the appetite for gold.
Since then, the banking sector has stabilized, and the US labor market and economy have stayed remarkably resilient despite the Fed's historic interest-rate hiking cycle, sparking worries that the central bank would keep rates higher for longer.
Then, the Fed indicated in September that it will likely raise rates one more time this year and keep them higher through 2024, sending US Treasury yields to their highest level in over a decade and fueling a rally in the dollar.
Gold has taken a hit, as have the shares of precious-metal miners. Barrick Gold shares have lost 11% over the past three months, Kinross Gold has slid 3% and Northam Platinum has tumbled 22%.
The SPDR Gold Shares exchange-traded fund, a popular fund tracking performance of physical gold, has declined 5% over the same period.
Still, not everyone is saying good riddance to gold.
Costco's chief financial officer Richard Galanti said during the company's earnings call last week that the retailer typically sells out its one-ounce gold bars within a few hours after they're restocked on the website. (Yes, Costco sells gold bars.)
Matt Dmytryszyn, chief investment officer at Telemus, says he expects gold prices to trade between $1,700 to $1,900 over the next six months. His firm has a small position in an exchange-traded fund that owns physical gold bars, and plans to hold onto it as a hedge against rate uncertainty.
"There's always the risk of some unexpected event happening," he said.
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