Did lack of liquidity play a role in Gold's rapid fall?

Perpetual Equity Investment Company

Perpetual Asset Management (Australia)

With Greece and China resolved for the time being, investors have quickly transitioned from macro concerns to earnings season and the results in the US and Europe so far have been quite constructive. However, the action in the gold market last night was interesting. Some attributed the bullion price decline to China revealing its gold holding for the first time since the GFC, but I think that rational lacks depth and causality. There was no doubt heavy selling, but this was seemingly driven by an initial gold price decline which triggered automatic stop-loss selling when most markets were closed and the lack of liquidity forced down the precious metal's price. When market depth returned the alternative currency recovered half of its losses. Nevertheless, there is little doubt that with the US Fed set to raise rates this year and next, the US dollar will rise and gold’s attraction as an alternative currency will decline. As such, I would not be surprised if gold trended towards USD1,000 an ounce over the next year as investors seek more income.

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Perpetual Equity Investment Company
Perpetual Asset Management (Australia)

The Perpetual Equity Investment Company Limited is an ASX listed investment company offering investors access to a portfolio of predominantly high quality Australian and global listed securities, selected by Perpetual Investment Management Limited.

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