Second Major Bank Says $2500 Gold in Cards | Market Rundown
Inflows into ETFs will be critical
Bottom line: non-commercial purchases do not need to increase materially to justify gold hitting $2,500/oz this year; inflows into ETFs will be critical and dynamics in assets under management will be a crucial indicator confirming whether price gains can be sustained
Today:
Market Rundown
“Gold Rallies as Fed Stops Hiking”
Zen Moment: Dog Agility
1- Market Rundown
Good Morning. The dollar is down 50 pts versus the G7. Bonds are weaker, Stocks are up but have given back some of their Google post-4pm earnings gains from last night. Gold is up $5. Silver Fu. are up 17c. Grains are up uniformly between 20 and 60 bps. Bitcoin is up 2.3% and ETH is up 2.5% in sympathy last night with the stock rally.
2- “Gold Rallies as Fed Stops Hiking”
Over the last few months we noticed the increase in Bank attention to Gold here. In particular was the interest by BOA. First by Hartnett, then by their equity analysts who were considering Gold as a “green” metal and their ideas that industry consolidation could happen since Gold and Copper mines are related Today, those analytical trends hit full stride.
BOA Lays Out their Case
There is a lot in this comprehensive report:
Central banks are weaponizing the USD. Meanwhile the Fed may stop hiking with inflation expectations picking up. Jewelry and investment demand are analyzed. The key missing point, they note, is mainstream investment demand. And that only has to pick up a little according to their model:
Our gold supply and demand model shows that investor purchases need to increase only slightly for prices to push higher: assuming that central banks keep boosting their gold holdings, increases in assets under management at physically backed ETFs should extend the rally.
Remember that it was Hartnett who recently said to sell stocks when the Fed does their last hike. It was also Hartnett who said inflation is here to stay weeks ago. It is all in here. Flows, FX correlations, rates, Macro etc. The headline below continues that theme.
The FeedBack Loop
While it is never safe to say Gold and Silver are going straight up. It is safe to say that Gold is now a permitted asset to recommend, and smart banks are obliging them in full rampup mode. The analytical bandwagon is starting.
Things are moving fast now; to what ends we do not know, but they are speeding up and keeping pace with investor awareness.
The virtuous feedback loop—which is must read to see the gold forest for the trees— here is starting.