Gold reaches 7 month highs as geopolitical risks are still abound. U.S. Dollar collapses on possible rate cuts in 2024, which is the market mispricing risk in an extraordinary manner. Seen with the volatility index (VIX) at pre pandemic levels.
(Chart 1)
Gold continues its ascent clearing the psychological $2000, trading above $2040. Attributing mostly to geopolitical reasons rather than inflationary, Gold is not an inflation hedge, the U.S. dollar is, Gold is a doomsday hedge (Chart 1). With the VIX (volatility index) now at pre pandemic levels, please refer to Chart 2, is an exercise in overconfidence, and we have been there before. Central Banks have been, throughout the inflation fight with interest rates, silently adding to their balance sheets, more so the Federal Reserve, pleaser refer to this link: Federalreserve.gov/monetarypolicy/bst_recenttrends.htm, in reference to The Fed's liabilities from the commercial banking sector and also currency (U.S. Dollars) in circulation. Both, as you can see have risen since 2022, which is akin to printing money. It is amusing dictomony, that rewrite of Central Bank mandates of the last 20 years of tightening liquidity, were replaced with managing inflation, whilst offering institutional monetary support. The Year-to-Date rally of the U.S. dollar has not been as dramatic as one could have hoped. In fact it has been a slight fizzer and with the hope that rates will be cut in 2024,which is wishful thinking with almost full employment, the USD has started to sell off in earnest (refer to Chart 1, separate pane).
Gold's rise is, as mentioned, due to geopolitical issues which is all to do with the Middle East. Israel's bombing campaign and attempt to destroy Hamas may very well draw in Yemen, Hezbollah and Iran into the conflict. If, the U.S. cannot hold Israel back from attacking Gaza in its disporpotante response to the Oct 7th Hamas attacks. The conflict may extend beyond any statistical measure that the State Department have written into their charts, much like their miscalculation with Ukraine's counter offensive against Russia. And if the Gaza civilian death toll reaches 20,000k.
Gold's next price resistance is $2058 of May 2023 highs.
___
All Gold anaylsis to date: chiasmusmagazine.blogspot.com/search?q=gold+price
Comments
Post a Comment