The Continuing Upward Trend of Gold Prices
Gold prices are continuing their upward trend on Friday, and with the decisive break above $2,400 per ounce shortly after 10 am EDT, analysts and traders are wondering how high the yellow metal can run in the current environment.
Adam Button, head of currency strategy at Forexlive.com, said that this recent move is a continuation of the broader rally, and it’s being driven by the same source.
“This rally started in China, and China continues to show up,” he said, adding that recent data show Turkey and much of the Middle East are also buying bullion.
Button noted that this week’s meeting between Russian President Vladimir Putin and Chinese Premier Xi Jinping is also very bullish for gold prices.
“If you’re a gold bull the picture of Xi and Putin hugging Is as good as it gets,” he said. “They’re trying to create a multipolar world, and you can’t do that if you’re relying on the dollar.”
Insight:
The geopolitical implications of major world leaders turning to gold as a hedge against economic uncertainties are significant. It signals a potential shift away from traditional reliance on the U.S. dollar and towards a more diversified global monetary landscape.
The Perfect Storm for Gold Prices
Sean Lusk, co-director of commercial hedging at Walsh Trading, told Kitco News that the combination of high inflation, massive debt issuance, and runaway central bank currency printing is pushing market participants into precious metals and other commodities.
“We’ve just printed too much money, and now you see the result of it,” he said. “Where are they putting all the money? Aside from, buying dips in equities, big money is going into metals as an inflation hedge. And not just us, but even economies around the world are doing the same thing. They’re increasing their holdings, and nobody knows where to be.”
Lusk said that he can’t imagine a better situation for gold prices to go higher.
“It’s a perfect storm of bullishness,” he said. “You have geopolitical worries. You had the pandemic. And what does our government do right after that? Prints more for all these funding projects that really haven’t started yet. Now you’re in a campaign year, so all those things, as they relate to gold, just create more uncertainties on the back end, and that’s why you continue to run here.”
“It just goes back to the old adage, anytime we create more of something, it’s worth less.”
Insight:
The current economic landscape, characterized by uncertainty and excessive monetary stimulus, is driving investors towards safe-haven assets like gold. This trend underscores the need for a more stable and diversified financial strategy in the face of ongoing global challenges.
Commodity Complex Catching Fire
Lusk said he’s seeing the entire commodity complex catching fire on Friday, with metals prices expected to go on a run right through the summer.
“We’re at $2,410, we’re back up to high,” he said. “Silver’s caught fire here, copper’s caught fire as an industrial metal, platinum. It’s really been a hell of a ride.”
“You can make an argument that crude’s underperformed, still up a little over 10 on the year, nothing crazy,” he added. “But if that gets going that’s going to bring everything else up.”
“We’ll probably get a real hot summer here.”
Insight:
The interconnected nature of commodity markets highlights the potential for significant price movements across various sectors. As investors seek inflation hedges and safe assets, commodities, including gold, are likely to remain in focus as part of a broader investment strategy.
Gold prices are holding well above the $2,400 level at the time of writing, and the precious metal looks poised to make a run at April’s all-time high of $2,431.55 per ounce.
Spot gold last traded at $2,411.36 per ounce, and is up 1.45% on the session, and 2.18% on the week.
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