Gold's recent rally is mostly due to five big buyers: four central banks and Tether, a company that deals in cryptocurrency.
Tether is buying for the very reasons that central banks are -- to diversify its holdings and hedge against inflation and significant dollar weakness, which Tether's crypto stablecoin USDT is pegged to. In the first half, Tether bought more than 27 metric tons of gold -- matching Kazakhstan. Only Poland, Uzbekistan, and China made bigger buys. Tether's buying escalated in the second quarter and might be one reason the metal has jumped this summer, write Jefferies analysts, adding, "Tether is no longer a niche participant, but a meaningful source of incremental physical gold demand."
Gold is now around $4,406 an ounce -- some 10% above 2026's low in July. Tether CEO Paolo Ardoino has said that the purchases could prop up gold in volatile times. Tether also issues a tokenized version of gold, converting ownership of the metal into digital rights on a blockchain. Tether Gold's second-quarter holdings rose 9.5% from the first quarter.
Ardoino argues that Tether Gold holders aren't just buying tokenized gold when the metal is rising: "They are using periods of market weakness to increase their ownership of physical gold through a product that is fully backed, transparent, portable, and accessible on-chain." A crypto company acting like a central bank. It's a different -- if not strange -- world.
Write to paul.lamonica@barrons.com
Last Week
Markets
The week began with Iran making new demands on the U.S. The first White House plan: Squeeze Iran economically. The second: Demand reparations from Iran. The White House also revived plans to fire Federal Reserve governor Lisa Cook. Stocks fell early in the week. Oil rose as new attacks on shipping began. July inflation softened to 3.4%, and tech stocks then rallied, with the S&P 500 setting a high on Thursday. Friday, stocks faded. On the week, the Dow industrials were off 0.6%, the S&P was up 0.4%, and the Nasdaq Composite rose 0.1%.
Companies
Taylor Farms, supplier of lettuce from Mexico linked to cyclospora, pulled prepared food containing jalapeños over salmonella fears. The Pentagon is asking the defense industry to accelerate weapons deliveries. Meta Platforms released a family of open-source artificial-intelligence models, Muse Glimmer, along with a 6,500-word essay from CEO Mark Zuckerberg. Nvidia is joining with Blackstone, BlackRock, Goldman Sachs, Brookfield Asset Management, Apollo Global Management, and KKR to deploy $500 billion for AI infrastructure; Bank of America added $250 billion more. Intel raised a stock offering from $15 billion to $20 billion. Reddit will join the S&P 500.
Deals
Talks on an AstraZeneca and Bristol Myers Squibb merger collapsed...Former Walt Disney CEO Bob Iger and Thrive Capital founder Joshua Kushner bought the Los Angeles Lakers from Guggenheim CEO Mark Walter for $12.5 billion.
Next Week
Tuesday 8/18
Retailers take center stage as a stellar second-quarter earnings season winds down. Home Depot reports quarterly results on Tuesday, followed by Analog Devices, Estée Lauder, Lowe's, Target, and TJX Cos. on Wednesday. Deere, Ross Stores, and Walmart announce their earnings on Thursday.
The Census Bureau reports new residential construction data for July. Economists forecast a seasonally adjusted annual rate of 1.35 million privately owned housing starts, roughly 80,000 fewer than in June.
Wednesday 8/19
The Federal Open Market Committee releases the minutes from its late-July monetary-policy meeting. At that time, the central bank kept the federal-funds rate unchanged at 3.50% to 3.75%, with three regional Federal Reserve bank presidents dissenting in favor of a quarter-point interest-rate hike.
Friday 8/21
S&P Global releases both its Manufacturing and Services Purchasing Managers' Indexes for August. Consensus estimates are for a 53.7 reading for the Manufacturing PMI and 53.9 for the Services PMI. This compares with readings of 53.9 and 54.6, respectively, in July.
The Numbers
1,040
Colorado River reservoir Lake Mead's water level in feet during the recent drought, a new low.
52.9%
Second-quarter labor share of GDP, the percentage of output accruing to workers, lowest since 1947.
756 K
The number of Australian accounts Meta Platforms took down on suspicion that users were under 16.
41%
The percentage of key ingredients in American medicines that are sourced solely in China.
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