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Gold picks up speed as USD and crypto prices drop


Gold had a very good run this week, rising on better-than-expected US inflation numbers and the turmoil in the crypto market.

US CPI data provide the first buying trigger. Analysts had expected total CPI to have risen by 0.7% month on month in October but the actual figure was only 0.4%.

What followed was described by one analyst as the “buy everything rally” (other than the dollar, which plunged) as investors snapped up stocks and commodities on the assumption that US inflation might be close to peaking. There is likely to be more inflow across asset classes as investors who have been sitting on the sidelines over the last weeks and months come back into the market at the first sign of a US economic improvement.

Dollar goes down, gold goes up, dollar goes up, gold goes up?

So when the US CPI data frenzy eventually started to cool, and the dollar began to recover, gold prices still continued to notch higher, trading up 0.8% on Friday.

This is not that surprising given that the “recovery” in the US, or rather, the slowdown in the decline, is still fragile, and there is no certainty that next month’s economic numbers will present a more stable picture. US jobless claims notched to the highest level in four weeks (although they are still historically relatively low), and two of the USA’s main trading partners, Europe (including the UK) and China, are struggling to maintain economic growth. Latest data shows that the UK’s third quarter GDP dropped for the first time since the worst of Covid, down 0.2%, and that the EU is heading for a recession this winter as Germany’s output is severely affected by the war in Ukraine.

Also, there is still upside technical momentum in gold suggesting more price gains in the near term.

Listen: WisdomTree analyst Nitesh Shah on commodities and inflation

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Crypto versus gold

Another influx into gold came as some investors fled the crypto markets, sent into turmoil over the liquidity crisis in the world’s largest crypto exchange FTX.

Regulators in Japan, Australia and the Bahamas, where FTX is operating, have all started taking action against the embattled cryptocurrency exchange over concerns that customers will face serious losses. One of the investors who is likely to take a big hit is Japan’s SoftBank, which might end up writing down its investment in the exchange. The Bahamas has already frozen the assets held by FTX Digital Markets, the local subsidiary.

For a moment it looked as if the situation would stabilise after the exchange’s bigger rival Binance said it might buy FTX. But with Binance quickly pulling out of the deal the crypto markets look exposed once more as traders and investors all sold crypto holdings at the same time, causing a liquidity crunch.

The safe-haven inflows have boosted the price of gold to over $1,760 an ounce and the usually less loved silver also benefited from the rally. Higher dollar prices slowed down the rally slightly but momentum still remains on the upside.

WisdomTree Gold ETFs

Product Name ISIN Exchange Ticker Listing Currency
WisdomTree Core Physical Gold
Hargreaves Lansdown | Interactive Investor EQi
WisdomTree Physical Gold – GBP Daily Hedged
Hargreaves Lansdown | Interactive Investor | Charles Stanley Direct | EQi
WisdomTree Gold 1x Daily Short
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | EQi
WisdomTree Gold 2x Daily Leveraged
Hargreaves Lansdown | Interactive Investor | AJ Bell Youinvest | EQi
WisdomTree Gold 3x Daily Leveraged
Hargreaves Lansdown | Interactive Investor | EQi
WisdomTree Gold 3x Daily Short
Hargreaves Lansdown | Interactive Investor | EQi

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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