Everything Is Coming Together For Gold [Global Nuggets Newsletter]
'‘Right now, everything is coming together for gold'
‘Right now, everything is coming together for gold,’ said Adam Button, chief currency strategist at Forexlive.com. ‘If inflation has truly peaked, then so has the U.S. dollar and that will continue to support gold prices’ As a Londoner, we have a saying that you wait all day for a bus and then 3 come along at the same time. That’s what has happened this week in the world of precious metals. After what has been the longest ‘bear’ market in years, things have changed abruptly and both gold and silver prices have risen substantially for the second week in a row. Gold has seen the best week in 2 years, rising 5% in (US$ terms) the week, with silver just behind a little over +4%. It seems that the stars have aligned. So, what is driving this change?
New data on the US economy has driven the US dollar down
After months of interest rate intervention in the US to bring down inflation, it seems that things are turning around, with year-on-year inflation in the US for October down to 7.7% from 8.2% a month earlier. In the belief that the US economy has turned the corner and inflation may have been tamed, stock markets globally rallied strongly. This is turn weakened the US dollar as it was seen less as safe-haven currency. Analysts have been claiming for months that the gold price has been held back by the strength of the US dollar ad should have been at least $200/ounce higher than it was. The US dollar reversal led to the jump in demand for gold, hence the rise in price.
Cryptocurrency chaos reinforces the stability of Gold
Another major tailwind for gold was the chaos in the crypto currency market. Already a week ago there was considerable concern for the stability of at least one crypto exchange, but recent days have seen the almost overnight implosion of an industry leader, as it struggled to maintain consumer confidence. Putting this into perspective, FTX, a leading crypto platform, valued at US$32bn last Wednesday, went to zero by Friday evening. Not only did the founder, known as SBF (Sam Bankman Fried), lose US$17bn, but regulators are concerned about fraud of at least US$1bn. Gold may not be as exciting to some as crypto, but has always remained a stable, secure source of wealth.