SafePortfolio @SafePortfolio: "$GOLD is down recently, mainly..."

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Germany

Edited

$GOLD is down recently, mainly because of the strong dollar and rising intetest rates and the expectation that inflation will go down as a consequence. If the FED doesn't succeed in taming inflation, which is more likely in my opinion, the gold price will go up again (because real interest rates are lower than expected - read more below). $GLD $SLV $IAU $GDX $SILVER $AEM (Agnico Eagle Mines Ltd) $GLDM $BAR $PHYS $PSLV $GDXJ

@SafePortfolio

Germany

3 years ago

𝙒𝙝𝙖𝙩 𝙙𝙧𝙞𝙫𝙚𝙨 𝙩𝙝𝙚 𝙥𝙧𝙞𝙘𝙚 𝙤𝙛 𝙜𝙤𝙡𝙙? Many factors influence the price of $GOLD , for example the fate of the $USDOLLAR . But one astonishing correlation determines the gold price more than everything else: the real interest rate on 10-year US bonds. Real interest rates are the nominal yield paid by bonds (the cash you receive) minus expected inflation. Let’s say 10-year US treasury bonds pay 2% per year but inflation is 3%, the real yield is -1% (you would lose money every year in terms of purchasing power, even though your bank account shows gains of +2%). These real interest rates are the main driver of gold. You can see in the chart that lower real rates lead to higher gold prices. For example from 2018 to 2020, when real rates fell from about +1% to -1%, gold went up a lot. Holding the world reserve currency becomes simply less attractive, gold as a storeholder of wealth gains popularity. 𝗖𝗼𝗿𝗿𝗲𝗹𝗮𝘁𝗶𝗼𝗻 𝘁𝗼 𝗶𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻 There are circumstances when gold shows weakness, even though inflation expectations are up. The reason are rising interest rates on longer term bonds. So if inflation rises but you get as well more compensation for your dollar holdings (US bonds), gold doesn't have an advantage. But if inflation rises quicker than the interest paid on bonds (-> real interest rates fall), gold shines literally. 𝗢𝘂𝘁𝗹𝗼𝗼𝗸 If interest rates rise, at one point the US would have trouble to service its already huge debt and the FED would likely lower the interest rates on long term bonds by buying a lot of them (also called "yield curve control"). This would lead to lower real interest rates again and a rise of the gold price. $GOLD.BARRICK (Barrick Gold) $SILVER $BTC Translate