What Stops This Bull?

"Gold is going to structurally be underpinned with buying until one or more of these three things show progress."

Intro: The following is excerpted from our coverage of Soc Gens recent report Conviction Thinking on Gold. The original report is also attached at bottom

Contents:

1. Price Drivers Scrutinized

   1. Inflation Stickiness

   2. Public deficits

   3. Geopolitical dangers

   4. Diversification by central banks/monetary authorities.

2. What Stops This Rally?

   1. Trust

   2. Fiscal Restraint

   3. Better Substitute for UST

1- Soc Gen’s Bull Drivers Scrutinized

In a well written report put out by Soc Gen’s Cross Asset Team made up of the bank’s Senior Commodity Strategist Florent Pele, Global Head of Asset Allocation Alain Bokobza, as well as heads of Commodity, Corporate, and even Technical trading, The bank seems to be “coming out” on gold now. Their assertion is simple. The drivers pushing Gold prices higher will at least remain in place until the 2024 US Presidential election is resolved

Given the current situation, Soc Gen says “stay positive on Gold”. Their specific criteria are: inflation stickiness, problematic public deficits, geopolitical dangers, and diversification by central banks/monetary authorities. None of which they see has a significant hope of resolving until after the end of the year.

Related posts:

• What Governs Gold’s Price

• We Will Buy Our Own Bonds Now

• China Correlations Matter

Inflation Stickiness

On a horizon of 3 to 6 months, there will very possibly be inflation “unsticking” as the last of its current problems—housing and services inflation— slip back a little. But this is noise. The kind of inflation we are incurring now is a manifestation of secular change baking into the economic cake for over 3 years. Unless those changes get “unbaked” or at least stop progressing, inflation will continue to rear its ugly head.