FXStreet reports that strategists at Natixis look at periods when gold prices have risen significantly and identify four usual explanations for a rise in the yellow metal. 

“The first explanation is expected inflation, which drives savers into gold as a safe-haven against a loss of the value of money. The rise in the gold price of 1973-75 and 1978-81 can be attributed to inflation.”

“The second usual explanation is a depreciation of the dollar: gold is then a substitute for the dollar as a reserve currency. The rise in the gold price in 1973 to 1975, 1978 to 1981, 1987-88, 2002 to 2012 and 2020 can be attributed to dollar depreciation.”

“The third explanation is a rise in risk aversion and, as a result, an equity market decline, resulting in investors switching from equities to gold. The rise in the gold price can be linked to the fall in stock market indices in 1987-88, from 2009 to 2012 and in 2020.”

“A fourth explanation is an excessive increase in the quantity of money, which leads to a loss of confidence in money to store savings. This can be the quantity of money in the United States (in dollars) or in the OECD as a whole. Rapid money supply growth may explain the rise in the gold price from 2009 to 2012 and in 2019-2020.”

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 1.639 million barrels in the week ended September 18. Economists had forecast a decrease of 2.325 million barrels.

At the same time, gasoline stocks dropped by 4.025 million barrels, while analysts had expected a decline of 0.648 million barrels. Distillate stocks plunged by 3.363 million barrels, while analysts had forecast a gain of 1.020 million barrels.

Meanwhile, oil production in the U.S. reduced by 200,000 barrels a day to 10.700 million barrels a day.

U.S. crude oil imports averaged 5.2 million barrels per day last week, up by 160,000 barrels per day from the previous week.

FXStreet reports that gold extends its decline below $1900 but the yellow metal weakness stays seen as a corrective by the Credit Suisse analyst team. 

“Gold extends its consolidation/correction following the move to our base case objective of $2075/80 in August for a test of a cluster of flagged supports at $1897/37, which includes the 23.6% retracement of the rally from the 2018 low. We look for this to continue to hold to maintain the sideways range. Should weakness extend though, we would see scope for a deeper setback to $1765, potentially $1726.”