💰Gold a Go ahead?🗽

For the past weeks, Gold has been aiming to hit another bull run and retreat after trying to run higher. With the current macroeconomic condition and geopolitical risk, Gold seems to be a hotcake once again. 

🏸Argument against Gold💣

Conventional wisdom often does not encourage the purchasing of Gold since it tends to move in the opposite direction to actual yields. 

Here’s their logic. Rising yields often imply a robust economic condition which is a negative backdrop for Gold since it increases the opportunity cost of holding Gold that does not produce any yield for investors. 

With investors expecting more Federal Reserve tightening, we have seen real yield climbing (see discussion in weekend Pika World Commentary) and turned positive for a while. 

⏳A more dovish environment💡

The argument for Gold is perhaps linked to the possibility that an economic downturn is likely to come, and that could force the Fed to be less hawkish and even dovish. A more extreme case would even point to possible rate cuts and QE within the following year. This tends to boost demand for Gold. 

Moreover, with the seizure of Russia’s foreign exchange reserves, there seems to be an appetite for Gold which countries typically can’t confiscate. This would mean higher gold demands from central banks. The sanction of Treasuries and dollars motivated this move further. Perhaps China would be worried too. 

🪜Cryptocurrency, an alternative to Gold?🧽

While some had expected cryptocurrency to end the case for Gold, most bulls on Gold don’t believe it is a perfect substitute for Gold, a new realization in the market. Simply put, Bitcoin is still considered a risky asset that had risen sharply with other high growth stocks in past years, and the role Bitcoin play as an inflationary hedge is dwindling. 

According to some articles, with the gold supply falling below its five-year average, it is perhaps a bedrock for a rally, if it is anyone’s guess?