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’ll warn you right off the bat, I have been waiting to write this piece for the past few days. You see, it’s a gold post, and as much as I try to take a bigger picture view, the trader-in-me still hates writing a bullish piece just as the market is about to have a minor correction. So I often get cute and wait for a dip before I publish.
But the gold decline refuses to materialize and I have decided to just post my piece – hoping I am not top-ticking this recent rally, but fearing it’s probably the surest sign we are headed lower over the short run.
Yet over the long-run, I contend something has changed in the gold market. Something we should all be paying attention to.
Whether it’s gold priced in CNY, EUR, JPY or AUD, it’s all the same chart – gold has had a strong rally in every currency.
Gold is not going up because of US dollar weakness – it’s going up in real terms.
The question is why?
There is little doubt that the dovish tilt by Powell has helped gold, but if you look at when the rally started, it was way before his post-Christmas cave.
I don’t have any wonderfully original insights to present to you today. Rather, what little I can offer is to connect some dots and make a guess that the timing is finally lining up for some bigger picture macro trends that have been brewing for some time.
I urge you to read the recent report by the World Gold Council titled “Gold Demand Trends Full year and Q4 2018. From the executive summary:
Look at those figures closely. Central Bank buying up 74% year-over-year! Highest annual net purchases since Nixon closed the gold window! These are some astounding figures that few are talking about. Everyone is blabbering on about every Trump tweet or focusing on the minute-by-minute progress in the Chinese-American trade negotiations, yet right in front of us has been a dramatic shift in the demand picture of the gold market.
My good friends at Murenbeeld & Co. created this great chart for me that shows the net purchases by the Central Banks over the past few decades to get a sense of the scale of the buying.