This one has really baked my noodle recently:
Especially as BTC, “digital gold”, goes nuts:
This became especially weird in the last few days as Janet Yellen was nominated for Treasury Secretary, indicating a rising risk of integration between the Treasury and Fed, a clear gold positive. Yellen says she is not persuaded by MMT but she sure behaves like she is.
Also positive and most important, DXY is on the verge of a breakdown and it very unsual for gold to fall in tandem with it:
BofA cites one reason:
- But now much more restrained citing the prospect of higher long-term interest rates ahead
- “That will put gold’s rally on pause until inflation expectation starts rising faster than interest rates”
- $1,775 this year
- $2,063 in 2021
But I wonder if the real problem isn’t just an excess of speculators in the metal and perhaps they need to be shaken out:
Certainly gold is not cheap. But its fundamentals are more by the measure of chaos in US monetary and fiscal settings than any direct one-to-one link to DXY. With the incoming Biden team looking uber-dovish and the Fed likely needed to offset a constrained senate conditions still look good for gold.
Or, is gold signaling that none of this is true and DXY ain’t going to fall?