Something odd has happened to the gold price this year. It has been unstoppable, rising to record levels as it decoupled from its traditional anchors.
Something odd has happened to the gold price this year. It has risen inexorably to record levels, decoupling from its traditional anchors.
This year, however – indeed, over the past 12 months or so – the gold price has kept climbing even as inflation rates have tumbled around the world and the US dollar, while volatile, has strengthened. Interest rates have only just started to fall, but have been relatively high for much of the year.It does have a strong correlation with sharemarkets. When share prices and those of other risk assets rise , so does the gold price.
America’s debt-to-GDP ratio is already 99 per cent and, according to the US Congressional Budget Office , is on its way to 125 per cent over the next decade on existing policy settings. There’s also geopolitical factors such as the war in Ukraine and, more recently, the vicious conflicts within the tinderbox that is the Middle East.
The sanctions the West has imposed on Russia , including the freezing/seizure of the Russian central bank’s foreign exchange reserves held offshore, have unsettled countries not closely aligned to the US. While gold, or any other asset targeted by China and Russia and other members of BRICS+, are unlikely to have any material impact on the US dollar’s primacy in the near term, it could potentially increase the level of “de-dollarisation” in the longer term.
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