Family Ties

Gold has broken out recently and the persistency of the breakout is a big change. Gold has been range bound for a number of years now and consolidating the last bull run from 2018-2020.

Why is this happening?

Let me tell you, precious metals (in general) is an incredibly complicated asset class for analysis. The price can affected by –

Central Bank Purchases

Consumer Demand

Industry Demand

The strength/weakness of the US Dollar

The movement of Real Interest Rates

Geopolitics

Fear of Currency Debasement

The list goes on and on. I’ve been tracking precious metals closely for years now and all of these influences have an effect during one time or another. And the weighting of a particular influence can change dramatically.

However, in this recent move for gold, something new may be happening. I’ve seen a few articles now suggesting the Chinese investors are moving money from real estate investments and into gold. Hmmm… interesting. Maybe this is the catalyst? Maybe not?

A new catalyst does seem to be at work, because we’ve had a stronger dollar and higher real interest rates. Both of these should be a meaningful headwind for gold prices. Whereas, obviously, tensions in the Middle East could be a tailwind if things were to escalate. But geopolitics has not really been a driver over the last few years.

Whatever the catalyst (which is being debated on the Terminal), the breakout of a multi-year range is significant and could continue.

Something to note is that gold, silver, and miners are related in that they tend to move together. The volatility is different and of course each have their own unique influences, but they are positively correlated. So it’s something to watch in the coming year(s).

NOTE: THIS IS NOT A BUY OR SELL RECOMMENDATION OF ANY KIND FOR ANY SECURITY. INFORMATION IS FOR EDUCATIONAL PURPOSES ONLY.