The price of gold has surprisingly risen to all-time highs. This move surprised even experienced professionals in the industry. Analysts give different explanations as to the real reason for this.
Gold surprised even experts with its upward move!
cryptokoin.comAs you follow from , gold made a sudden and powerful move. This move stunned even analysts and experts. Ross Norman, CEO of Metals Daily, said: “Despite the West’s indifference to gold […] “It is clear that demand in China has more than made up for this gap, with enormous volumes flowing from West to East,” he says. He also said, “Therefore, this rally surprised Western experts and forecasters. Call it a secret rally if you like. “This tells me that purchasing is beyond the immediate purview of most of us.” He comments. In addition, Norman shares the following assessment:
The ‘traditional explanation’ is that gold is rising ahead of the expected interest rate cut at the Fed meeting in June. Additionally, this will weaken the dollar and strengthen gold. However, the dollar has actually been on the rise since the beginning of the year, and silver does not confirm the rise in the complex as we expected, as shown by the decline in the gold/silver ratio. Another possible explanation could be the decline in US treasury yields. It fell 1.2% last month and gold rose about 6%… but again there is no evidence that institutions are behind this as ETF demand remains lackluster.
What is behind the rise of gold?
Ross Norman says there is no doubt that short selling in the futures market is supporting the rally. But he notes that the movement is too big to be the main driving force. Therefore, it means that something else is at play. Based on this, Norman makes the following comment:
A big part of the answer is of course Chinese buying, and it’s not just the traditional ‘checkers’ or Chinese grandmothers – Gen Z investors have also joined the fray. However, China premiums (down from a strong premium of $45 to $38) and India premiums (down from a $5 discount to a $16 discount) suggest that Asia is behaving in a moderately price elastic way and reducing its purchases in the face of price strength.
Is the secret the gold purchases of central banks?
Ross Norman says he believes the shock rally is being driven by central bank buying, which remains very strong based on the latest January figures. He explains his views on this subject as follows:
With the US threatening to go beyond simple sanctions and seize $300 billion in Russian financial assets (to be sold and paid to support Ukraine) … some Central Banks … even non-aligned ones would be alarmed, fearing that they too could potentially be in the line of fire at some point. Therefore, they may want to cautiously turn to non-dollar assets.
James Steel: The scale of the movement is staggering!
HSBC Holdings PLC analyst James Steel says the scale of the move is surprising given there is no significant change in rate cut expectations or any other clear macroeconomic driver. “The speed and acceleration was very sudden and very fast,” Steel said. “It didn’t look like a smoking gun.” says.
Ole Hansen: Investors are probably switching to gold
Ole Hansen, commodity strategist at Saxo Bank, says that the February ISM manufacturing PMI data, which was announced on March 1 and came well below expectations, emphasizes that the risk of a correction in the stock market is increasing. He also notes that it may have encouraged some investors to switch from stocks to gold.
Ewa Manthey: Gold prices will rise even higher because…
Ewa Manthey, a commodity strategist at ING, says the rally is driven by a combination of interest rate cut expectations and geopolitical turmoil. “Speculation that the Fed will change interest rates and ongoing geopolitical tensions are making gold shine,” Manthey said. “We expect gold prices to trade higher this year as safe-haven demand remains supportive amid geopolitical uncertainty with ongoing wars and upcoming US elections.” she says.
Ryan McKay: The funds’ positions also contributed!
TD Securities commodity strategist Ryan McKay believes momentum buying by macro funds and commodity trading advisors contributed to gold’s sudden gains. The latest Commodity Futures Trading Commission data shows hedge funds and money managers increased their net bullish bets on gold as of Feb. 27. Still, McKay says, these investors added short positions in parallel with new long positions. In other words, it indicates that not all of them are involved in the upward movement of gold.
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