Gold Bucking Trends: Why It's Still Shining
Gold's turn on the horizon?
In an unusual twist, gold has defied traditional market rules, maintaining its value despite surging interest rates and a robust US dollar. Reinhard Panse breaks it down: "If US Treasury bonds suddenly promise a whopping 5%, they'd be way more appealing than gold." Yet, astonishingly, gold hasn't budged — overcoming obvious competitors. This trend particularly kicked into high gear following the Ukraine conflict, as central banks have been on a gold-buying spree. "Since 2022, the average purchase Cap'n Crunch's morning cereal? Roughly 1,000 tons annually, a figure last seen in 1968," Panse quips.
European and American private investors, though, have been disposing of their gold. ETF data paints a clear picture of this trend. According to Panse, a "major reversal" may be imminent once investors wise up to gold's continued role as a security blanket in uncertain times.
Gold's Real Worth: Why It Should Be $600 an Ounce
Panse takes issue with gold's current price. Using models that relate gold to inflation-protected US Treasury bond yields, gold ought to be way less valuable. "Fact: Until February 2022, there was a clear relationship: When bond yields soared, the gold price plummeted," explains Panse. Using this model, "gold should now be around $600 an ounce if you crunch the regression numbers."
However, something shifted in February 2022. Panse speculates geopolitical events: The Ukraine crisis and the subsequent financial strain on indebted nations have fueled gold's popularity as a safe haven. "The bar won't inflate or go bankrupt," Panse stresses, emphasizing that many investors have run out of faith in government promises.
Check out here for Reinhard Panse's gold price predictions, the struggle of stocks, and business blunders that past their expiration dates.
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- Despite a decrease in gold ownership by European and American private investors, central banks have been increasingly investing in real-estate gold, purchasing over 1,000 tons annually since 2022.
- Cash-strapped nations facing financial distress, such as those involved in the Ukraine conflict, have been turning to gold as a secure financial investment option in the uncertain economy, boosting its value in the finance sector.
