What moving gold?

Stephen Innes SPI Asset Management

Gold

London doesn't appear to be too caught up in the year-end gold hype wasting little time to knock the precious metal off its high horse. As I told my colleagues today from a pure macro and risk perspective, it makes little sense for gold to be trading above $1500/oz. The surging equity market, and higher gold prices seldom, if ever exist in the same chart quadrant while simultaneously moving higher. But like any other commodity, gold also trades on supply and demand factors.

This is what I think is driving gold

Gold has passed the phase one trade deal test with flying colors. So that is at minimum mildly bullish for gold.

Official sector buying should remain a regular feature in 2020 as central banks diversify reserves away from the USD. With that in mind, I think there is more to the Russia story Sovereign Wealth Fund story that meets the eye and that is Russia Central Bank demand in 2020 What's excellent about central bank buying as they are price level agnostic since their plan is to store the bars sitting in the vault doing little more than collecting dust for decades ahead and unlikely to see the light of day before +2050

Gold holdings continue to rise with SPDR ETF, the world's biggest gold-backed exchange-traded fund, rose by 2.92 tonnes to 888.85 tonnes. It needs to be hedged somewhere, so bullish for gold. So, there remains an insatiable appetite for gold into 2020

Wither thy dollar? I’m having trouble finding anyone bullish USD into 2020, and since gold prices are most closely tied to the underlying movement of the USD and real interest rates, this argument continues to resonate.

Is it too early to factor in a possible Biden or market devastating Warren presidential inauguration? Absolutely not the election tails are massive and currently cheap to own via gold.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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