Gold hit record high 2'135.39/oz in early trading hours
Gold surged to a new all-time high as growing expectations for US rate cuts early next year. This latest leg of gold's rally has been turbocharged by comments on Friday from Fed Chair Jerome Powell. Precious metal's strength has been underpinned buy other factors as purchases by governments and central banks as well as geopolitical uncertainty.
A wake-up call to start the week with Gold trading above $2,100 and digital gold aka bitcoin trading above $41,000
I do see 2 messages here: 1) Short-term: Mr Market believes Mr Powell is bluffing, i.e rate cuts are coming; 2) Long-term: dollar debasement is inevitable. Investors and central banks are looking for reserve status
Is massive buying by China the main reason for the current gold rally?
Gold trading above $2,000 despite real fund rates above 2% and the strong dollar is one of the main surprises of 2023. One theory is that China's "Massive Accumulation Of Gold" is behind Gold resilience this year. Indeed, according to unofficial tallies - such as that kept by Gainesville Coins analyst Jan Nieuwenhuijs - total gold purchases by the Chinese central bank (reported and unreported) are significantly bigger than what has been officially disclosed, and in Q3 alone, China purchased 179 tonnes of physical; year-to-date the PBoC bought 593 tonnes, which is 80% more than what it bought in the first three quarters last year. As such, China's total estimated gold holdings are 5,220 tonnes, more than twice what’s officially disclosed at 2,192 tonnes... Source: www.zerohedge.com
They just started buying gold...
CTAs have reversed the gold short into a long, but they could be buying much more on the back of this break out. They are more than happy to play this momentum move... Source: Bloomberg, TME
As highlighted by Tavi Costa, one of the positives for gold today is the consistent neglect of the metal as a defensive alternative over the past few decades
This is evident in the significant underrepresentation of precious metals among traditional investment strategists. Source: Crescat Capital
Gold has seen a "Santa" rally every December since 2017 with the average monthly gain near 4%. (silver 7.25%).
Source: Ole S Hansen, Saxo
Be careful not to look at gold only against the dollar. Gold is at its highest against many FIAT currencies
But even the $2,000 an ounce level is intriguing: despite clearly positive real rates and the appreciation of the greenback, gold is close to all-time highs. Looking forward, two scenarios are possible: o 1) Gold is overvalued and should soon depreciate o 2) Gold is seen as a safe haven against geopolitical uncertainty, but also against the political disorder in Washington and the declining confidence in the Fed. If this is the case, a possible depreciation of the dollar and a fall in the real interest rate could benefit the yellow metal. Bottom-line: Gold remains an attractive portfolio diversifier Source chart: Tavi Costa, Bloomberg
US inflation data for Oct undershoot consensus
Headline dropped to +3.2% from 3.7% in Sep vs 3.3% expected, Core CPI dropped to 4.0% from 4.1% vs 4.1% expected. Dollar and Yields plunge. - Following two months of higher than expected US CPI numbers (mainly driven by higher energy prices and healthcare costs), the October CPI print was expected slow materially (from 3.7% to 3.3% yoy on headline CPI) while the core was expected to remain unchanged at 4.1%. But today’s CPI print is a miss across the board with both headline and core numbers coming in below expectations on both a sequential and annual basis. - Headline CPI came in at 3.2%, below the 3.3% expected, while MoM CPI also missed expectations, being vs. consensus at +0.1% and sharply below last month's 0.4%. Source: Bloomberg, HolgeZ, www.zerohedge.com
