The market underestimated the resolve of the Fed to fight inflation.
Bitcoin maximum drawdown driver#
The war provided a temporary positive catalyst however, the dominant driver through most of the year was increasing pressure on gold prices from Fed policies and the U.S. By May, the war premium had faded as it became clear that the fighting was not likely to escalate beyond Ukraine. However, once Russia’s bombing of Ukraine began, gold went on to test its all-time highs on 8 March at $2,070 per ounce. It broke out in February 2022 as warnings surfaced of a possible attack on Ukraine. Gold had been trading in a range centered on $1,800 for most of 2021. Gold saw a maximum drawdown of 11.3% but finished with just a 0.3% loss, which was a very respectable result, given the 18.1% loss for the S&P 500 Index 4 and 64.3% loss for bitcoin. While gold ended nearly unchanged, the year was far from calm, with prices dropping $450 from highs to lows before returning to its starting point. Gold in 2022: It’s Been a Wild Rideįor the year, the gold price finished with of loss of just $5.18. The NYSE Arca Gold Miners Index (GDMNTR) 2 gained 1.1%, while the MVIS Global Junior Gold Miners Index (MVGDXJTR) 3 advanced 1.7%. The gold miners were mostly quiet in December. More purchases in December could indicate consistent buying from China in 2023, which could bode well for the gold market. In the past, PBOC had purchased consistently for many months between long periods of inactivity. This is the first official purchase by the PBOC since 2019. The People’s Bank of China (PBOC) announced it purchased 32 tonnes of gold in November. For the month of December, gold gained $55.50 (3.1%) to end the year at $1,824.02. This enabled gold to maintain some upward momentum. Dollar Index (DXY) 1 remained subdued following the drubbing it took in November. Federal Reserve (Fed) comments to remain vigilant on inflation. Twenty to thirty-dollar daily moves were common, moving higher on positive inflation reports or lower on strong economic news and U.S. Gold held on to its November gains, bouncing around the $1,800 per ounce level during December. December 2022: Hawkish Fed, Sluggish Dollar, and a China Gold Bug
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