Gold Prices Surge Amidst Uncertainty, Driven by Market Conditions
Recent analysis from The Kobeissi Letter highlights the driving force behind gold’s price momentum – uncertainty. Heading into this year, gold had been trailing the S&P 500 by approximately 10% since 2020. However, as uncertainty in the market has increased, gold prices have surged, with GLD up over 109% compared to the S&P 500’s 74% increase.
The analysts at The Kobeissi Letter also point out that gold funds saw approximately $8 billion in net inflows three weeks ago, signaling a significant flight to safety. This surge in inflows has resulted in the four-week moving average reaching around $4 billion, an all-time high.
Furthermore, central bank buying of gold remains historically strong, with foreign holdings of Treasuries at a two-decade low of approximately 23%. Additionally, global gold reserves have surged to about 18%, the highest in 26 years.
The weakening of the US Dollar Index (DXY) to a 52-week low has also played a role in gold’s rise. A weaker dollar makes USD-denominated gold more affordable for foreign investors, with gold essentially acting as a leading indicator for tariffs.
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