As volatility returns today, with the $NASDAQ 100(NDX)$ down over -3%, gold has surged by another +$100/oz. Meanwhile, the US Dollar index, $ $USD Index(USDindex.FOREX)$ , is pushing below 100 for the first time since September 2024. If equities revisit their lows, $Gold - main 2506(GCmain)$ could surge well above $3,500/oz. By@KobeissiLetter
Heading into this week, our premium members took shorts in the $S&P 500(.SPX)$ . We called for a drop below 5325 which was just crossed. Gold has been a key leading indicator for all risky assets.
Gold is trading like we are in a depression:
Over the last 20 years, $Gold - main 2506(GCmain)$ is now OUTPERFORMING stocks, up +620% compared to a +580% gain in the $S&P 500(.SPX)$ . Over the last 9 months, gold has officially surged by over +$1,000/oz.
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What is gold telling us?
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Beginning in 2020, stocks widened their performance gap against gold. However, as equities have entered a bear market, capital has rushed into gold.
For the last 12+ months, gold is the ONLY global safe haven asset now. US bonds are not as desired.
As shown below, gold has CRUSHED bond returns over the last 4-5 years. Since March 2020, gold is now up +114% while a popular bond-tracking ETF, $iShares 20+ Year Treasury Bond ETF(TLT)$ , is down -45%.
This shift in sentiment has been gold's most bullish development in recent history. So, why did it happen?
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The answer lies behind persistent inflation and US deficit spending. US interest expense on national debt hit a record $1.2 trillion over the last 12 months. Funding this debt requires mass issuances of US Treasuries. As the US floods the market with bonds, bond prices fall.
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We saw nearly $7 trillion in gross issuances of US Treasures in just 3 months during 2023. For the entire year of 2023, a whopping $23 TRILLION in US Treasuries were issued. In 2024, mass issuances continued and this remains the case now.
Investors no longer want bonds.
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When the trade war began, it only added fuel to the fire. The economic policy uncertainty index has surged to its highest level on record, and it's not even close. We are now at levels more than TRIPLE where they were in the 2019 Trump Trade War 1.0. Truly unprecedented.
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Gold fund net inflows have hit a record $80 BILLION year-to-date. This is 2 TIMES more than the previous high set in the full year 2020. Investors are pouring money into gold at a record pace amid uncertainty. Not even 2020 came remotely near what we are seeing now.
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Meanwhile, global net gold purchases by central banks hit 24T in February. Over the last 3 years, world central banks have acquired a massive 3,176 tonnes of gold. Central banks are calling for a "soft landing" while stocking up gold. It simply does not add up.
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Meanwhile, imports of physical gold have gotten so large that the Fed has released a new GDP metric. Their GDPNow tool now adjusts for gold imports. Q1 2025 GDP contraction including gold is expected to be -2.2%, and -0.1% net of gold. Gold buying is at recession levels.
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Lastly, as the trade war heats up, gold and treasuries have are even more important. China's holdings of gold and US Treasuries have moved in complete opposite directions, as shown below. Keep watching gold.
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Here's a reminder: When adjusted for money supply, gold prices remain 75% below their peak levels reached in 1980.
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