Analysts at The Kobeissi Letter believe the gold market is experiencing its strongest period ever, driven by several key factors.
Uncertainty Fuels Gold’s Rise
Gold’s performance has dramatically shifted. While it lagged behind the S&P 500 by about 10% since 2020, increased global uncertainty has seen gold surge 109% in the same period, outpacing the S&P 500’s 74% growth. This shows that investors are increasingly turning to gold as a safe haven asset.
Record Investment Inflows
The gold market is also seeing massive investment. Gold funds recently saw a record-breaking $8 billion in net inflows in just three weeks. This resulted in a four-week moving average of approximately $4 billion – another all-time high. This huge influx of money strongly suggests a significant flight to safety.
Central Banks are Buying Big
Central banks are also heavily involved, continuing to buy gold at a historically high rate. This is further underscored by falling foreign holdings of US Treasuries (down to a 20-year low of roughly 23% of US government debt) and a corresponding rise in gold holdings as a percentage of global reserves to an impressive 26-year high of around 18%.
Weak Dollar Boosts Gold’s Appeal
The weakening US dollar is another factor boosting gold prices. The US Dollar Index (DXY) recently hit a 52-week low, falling nearly 10% since the start of trade wars. A weaker dollar makes gold, priced in USD, cheaper for international investors. Analysts suggest gold is even acting as a leading indicator for trade tariffs.
Disclaimer: This information is for general knowledge and shouldn’t be considered investment advice. Always conduct thorough research before making any investment decisions.
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