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Last week, when gold prices dropped to a two-year low, the market was down roughly 12% since the start of the year. This week, the precious metal has seen a short-covering rally pushing prices back above $1,700, cutting the loss to 6% year-to-date. Shah said that he suspects the growing divergence between the physical market and the paper market is the reason why gold has performed well in the current environment.
"The physical market is providing a lot more support to the market than we might actually think," he said."This is similar to what happened in 2013 when falling future prices unleashed major demand for the physical metal."