Could Gold Collapse?

Highlights

  • Regime: Gold bull market
  • Macro: Bond yields peak
  • Valuation: Scenarios explored
  • Flows and Sentiment: Neutral
  • Technical: Pullback

REGIME — GOLD BULL MARKET

  1. Short-term real interest rates are below 1.8%. TRUE
  2. The gold price, measured in a basket of currencies, is rising, measured by a 35-month exponential moving average. TRUE
  3. The gold price relative to the S&P 500 is rising, measured by a 35-month exponential. TRUE

Gold outperforms the S&P 500

Source: Bloomberg

MACRO

Have bond yields peaked?

Source: Bloomberg

Beware of convergence in yields

Source: Bloomberg

Inflation cools

Source: Bloomberg

Real rates rise

Source: Bloomberg

VALUATION

The yields that drive gold

Source: Bloomberg

Valuation Part 1

Negative real rates rarely cause a gold premium

Source: Bloomberg

Valuation Part 2

Great expectations

Source: Bloomberg

The impact of rates on the gold price

Source: Bloomberg

Historical inflation is baked into the gold price

Source: Bloomberg

Real yields were high in the 1980s and 1990s

Source: Bloomberg

Gold price scenarios

Source: ByteTree

FLOWS AND SENTIMENT

Source: ByteTree Terminal. Gold held by funds since 2017.

Speculative gold longs are modest compared to shorts

Source: Bloomberg
Source: Bloomberg

BOLD holds its ground in 2022

Source: Bloomberg

BOLD does the job, just without the volatility

Source: Bloomberg

SUMMARY

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