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Gold prices have fallen a little in recent days, why?

14/05/2021

Well one factor has been that inflation has been showing some growth. The market therefore thinks that interest rates could go up, as central banks have some scope to increase the rates, from around zero, as well as seeking to slow inflation. This means that as an asset which earns no interest, gold has a higher implied cost for investors.

The second factor is that mining it has become viable so some more mining is underway. This is an interesting contrast with Bitcoin, where the views, expressed by Elon Musk, that Bitcoin production, called ’mining’, residing in large computers many in China is massively environmentally damaging.

This arises from the carbon cost of the often coal powered electricity generation. These comments have had a relatively massive impact in lowering the price of Bitcoin.

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