“Gold Prices Surge as Western Investors Take Control, Driving Prices Higher – Expert Analysis Reveals Impact on Global Markets”
In the past two years, the East has seen a significant increase in gold prices, decoupling from the Western pricing model. However, Western investors have now taken the lead and have been pushing gold prices higher since June 2024.
Western investors are shifting away from speculative trading and turning to gold as a safe haven investment. This shift is bullish as Wall Street has limited exposure to gold, leading to a surge in prices of over 30% year-to-date.
The price of gold is primarily determined by the marginal buyer, who sets the price based on global gold flows between the East and the West. Historically, Western institutional supply and demand have driven prices, while the East has helped stabilize markets during bull and bear markets.
Central banks in the East, particularly China and Saudi Arabia, have been major buyers of gold, driving prices higher due to geopolitical tensions and financial instability. This has led to a surge in prices since early 2022.
Recent data shows that Western investors have been driving up gold prices since June, with gold ETF inventories increasing and the UK becoming a net importer of gold. This shift has caused a break in the correlation between the gold price and TIPS yield, with the West now leading price increases.
While the East has seen a decrease in gold demand, the West continues to drive prices higher, indicating a shift in market dynamics. The tight gold market has led to a rapid rise in prices, with Western investors buying gold as a form of financial insurance.
Overall, the outlook for gold remains positive as Western investors continue to drive prices higher. This shift in market dynamics is essential for investors to understand as it can impact their investment decisions and financial stability. Gold Investment Advice: Why You Should Allocate More to Gold Now
Investment advisors recommend a gold allocation between 0 and 1%, which is almost nothing. Surprisingly, this recommendation hasn’t changed since 2017, despite recent global events that have impacted financial markets.
In a recent survey by the World Gold Council, it was revealed that some institutions are hesitant to invest in gold because other large institutions are not doing so. This suggests that Wall Street is currently underweight in gold investments, leaving room for potential price increases when more entities start allocating a significant portion of their portfolios to gold.
A strategist at BofA even stated that gold seems to be the last “safe haven” asset standing, as other traditional safe assets face risks due to increasing U.S. debt levels. With concerns over U.S. funding needs and their impact on the Treasury market, gold is becoming more attractive as the ultimate perceived safe haven asset.
The long-term ratio between credit and gold is a key driver of gold prices. Historically, whenever the ratio between the value of U.S. monetary gold and the dollar money supply reached a bottom, signaling an abundance of credit relative to gold, a gold bull market followed. Current credit-gold ratios suggest that we are in the early stages of a gold bull market.
Overall, geopolitical tensions, high debt levels, lofty equity valuations, and currency debasement are all factors contributing to the attractiveness of gold as an investment. It’s important to consider increasing your allocation to gold in your investment portfolio for potential long-term gains and stability.
(Note: This content was originally published on Money Metals Exchange.)