Last week, most assets fell because of inflation scare, and even $GOLD ($GLD, $GLDM) took a hit. Gold is now almost 20% down from August highs, and some miners like Barrick Gold see their stock price drop despite positive earnings results and healthy fundamentals.
With all the “money printing” from the governments, one has to wonder.
𝘼𝙧𝙚 𝙩𝙝𝙚 𝙢𝙖𝙧𝙠𝙚𝙩𝙨 𝙬𝙧𝙤𝙣𝙜 𝙖𝙗𝙤𝙪𝙩 𝙂𝙤𝙡𝙙?
Let’s look into why the price of gold has fallen during the last couple of weeks.
Gold is negatively correlated with treasury real interest rates, i.e. rising real rates adversely impact the price of gold. Since mid February, treasury rates have risen as investors start to anticipate inflation.
This creates the following paradox:
✅ Investors’ expectation of economy overheating and consequently upcoming inflation leads to treasury bonds sell-off
✅ The bond sell-off puts downward pressure on their price, increasing their nominal yields
✅ Inflation expectations are not completely priced in real rates yet, so they rise
As a result, the10-year treasury real yield has grown from -1.06% to -0.60% on Thursday, putting pressure to gold price ⚡⚡⚡
𝙏𝙝𝙚𝙧𝙚 𝙖𝙧𝙚 𝙨𝙤𝙢𝙚 𝙨𝙩𝙧𝙤𝙣𝙜 𝙩𝙖𝙞𝙡𝙬𝙞𝙣𝙙𝙨 𝙤𝙣 𝙩𝙝𝙚 𝙝𝙤𝙧𝙞𝙯𝙤𝙣 𝙛𝙤𝙧 𝙜𝙤𝙡𝙙
However, there are a few tailwinds for gold coming up the following months
🚀 Inflation is expected to rise :
* once the economies start to open, people will start spending more, driving prices up
* because of the base effect – inflation will rise as the “pandemic” low levels of inflation from last year will gradually rotate out of the equation
🚀 As the pandemic is far from over, more support for the economy is needed (money printing, low-interest rates)
🚀 Government debts are at all-time-high. The Fed will have to intervene at some point to keep interest rates low despite inflation so that government debt can be serviced
🚀 Possible corrections in speculative assets (see GME, bitcoin) may turn more investors towards gold as a safe haven.
It is hard to tell how these forces will play out, but a plausible narrative for gold performing well over the next months can be presented.
Please comment your thoughts about gold, do you think prices will continue to fall, stabilize or rise
Who is manipulating the price of gold?
Almost platform is trying to cooperate to kill margin account that is the reason why they try to drive the gold price goes against the trend, so if you are trading as a slot should not pay attention to this because with the exploding of the financial bubble the price of gold will boost in this year.
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