Jakarta, CNBC Indonesia – World gold prices are under pressure this week. This is due to issues tapering who have not left the financial markets.
Even so, world gold prices rose 0.52% to US$ 1,898.13/troy ounce on Thursday (10/6/2021). Friday (11/6/2021) morning, the price was already above US$ 1,900/troy ounce.
However, reflecting on history, world gold prices could decline by more than 45% due to tapering. When world gold prices collapse, domestic prices for precious metals such as Antam’s gold also decline.
Tapering is a policy of reducing the value of the asset purchase program (quantitative easing/QE) the US central bank (The Fed). When this is done, the flow of capital will leave the country emerging market and return to Uncle Sam’s country.
This can trigger turmoil in financial markets called taper tantrum. When that happened, the US dollar became mighty, and the world gold price, which was priced in Uncle Sam’s currency, took a hit.
Taper tantrum occurred in the period 2013-2015. But long before, gold had reacted to the Fed’s monetary policy.
Before pouring out QE due to the coronavirus disease (Covid-19) pandemic since March 2020, the Fed did the same thing during the 2008 global financial crisis. The US central bank implemented QE in 3 stages.
QE 1 began in November 2008. Then QE 2 began in November 2010, and QE 3 in September 2012.
The value also varies, when QE 1 the Fed bought backed securities worth US$ 600 billion. Then QE 2 was also worth US$ 600 billion but this time what was bought was US government bonds (Treasury).
QE 1 and 2 brought gold prices skyrocketed and touched an all-time high at that time of US$ 1,920.3/troy ounce on September 6, 2011. After that, gold prices sharply corrected to US$ 1,600/troy ounce and finally consolidated with the upper limit. in the range of US $ 1,800s/troy ounce, gold has never again approached its record.
QE 3 released by the Fed in September 2012 has not been able to bring world gold prices back to US$ 1,900/troy ounce. It even ended in “catastrophe” for precious metals.
QE 3 is different from the previous two monetary stimulus, this time its nature open-ended. This means that the value is not limited as needed.
At one point when the US economy has recovered then the QE will be discontinued, but previously it was done tapering. QE 3 at that time was worth US$ 85 billion per month.
Even though the QE value is large, the gold price doesn’t really respond because the market knows it will be done tapering that triggers taper tantrum. Sure enough, the Fed, which was then led by Ben Bernanke, issued a discourse tapering in mid-2013 and began reducing QE by US$10 billion per month starting in December, until finally discontinuing in October 2014.
It didn’t stop there, after QE ended there was a discourse of normalization, aka the Fed’s interest rate increase. As a result, gold prices continued to decline to the lowest point reached at US$ 1,045.85/troy ounce on December 3, 2015.
This means that, when viewed from the record high in 2011 to the lowest level, the world gold price fell 45.54% within 4 years.
Savior Inflation
Reflecting on 2013, gold prices could also decline this year. But there is one thing that can be a “savior” namely US inflation, where the current figure is rising sharply, much higher than in 2013.
The latest data Thursday showed inflation in the US rose to its highest level since August 2008, in May 2021. Inflation rose 5% compared to the same period last year and was higher than Wall Street’s expectations of 4.7%.
The US Bureau of Labor Statistics said excluding food and energy prices, inflation was 3.8%, the highest in nearly three decades. The surge in used car prices has pushed up inflation.
The sharp increase in inflation has actually been predicted by the Fed, and is said to be temporary. However, if it is sustainable then it can be profitable for gold.
This is because gold has traditionally been considered a hedge against inflation, when inflation is high then demand has the potential to increase and dampen sharp price declines.
(boss / boss)
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