Kitco News' contributed commentary features articles and opinions from some of the top experts in the gold industry.
Demand from investors seeking a haven against weakness in stocks and bonds, as well as geopolitical turmoil in the Middle East, has been pushing both gold and the U.S. dollar higher. December Gold Futures are bullishly consolidating recent outsized gains near the key $2000 level heading into the weekend.
The U.S. 10-year note recently hit 5%, while the 20-year bond and the 30-year bond now exceed 5%. This has pushed up mortgage rates, which are now at around 8%. In turn, this puts pressure on home buyers who need to remortgage. This bold policy move to rejuvenate its economy is a very rare occurrence, and one of the largest cash injections in the history of the PBoC. The last time China rolled out similar fiscal policy measures was back in 2008, along with the Fed bailing out U.S. banks, and this latest injection could be just the beginning.
Other restraints on the economy include higher gasoline prices and a surge in long-term interest rates that make it far more expensive to buy houses, cars, appliances, and basic living expenses. In the more than 60 years covered by this chart, the Leading Economic Indicator has never suffered a peak-to-trough decline of 10.5% without the economy having entered recession. And the LEI has never declined for longer than 20 months from its peak without the economy having entered recession.
Taking all of this into account, closing in on an expected breakout to all-time highs above $2100 may have stimulated some rebuilding of Western institutions' depleted gold positions. Recent data shows that along with speculative momentum, long-term investors are starting to jump into the market and buying gold-backed exchange-traded products.
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