Bulls vs bears
I thought it would be helpful to sum up the major points for the bearish and bullish picture for gold. With price taking out all time highs the moves attract considerable headlines, so it is a good time to take stock and see what the bull and bear case look like side by side.
Bullish case for gold
1. Low interest and the Fed's dot plot doesn't see any hike in rates for the next 2 years.
2. Huge amounts of money being printed by central banks around the world devalue currencies
3. Poor returns expected in equity markets with may investors staying heavily in cash
4. Tensions between the US and China elevating again.
5. Expanding COVID-19 case count in the US. Around 25% of all cases are now in the US.
6. Gold taking out all time highs is a significant technical break.
7. Real yields are negative. This means that when you take yields (10 year) and minus the inflation the yields are negative.
8. There are growing concerns about getting access to physical gold. The more this builds, the more gold prices will rise.
9. The US dollar is weak and likely to stay weak for the medium term
10. There are record holdings in Gold etf's.
Bearish case for gold
One Swiss private bank, Lombard Odier, sold half of their gold holdings as price made all time highs. See here for an article on it from CNBC. Their rationale was that the negative US economic outlook is only temporary and real interest rates will return to positive and eventually recover.
1. So the bearish case for gold seems to revolve around a swifter than expected COVID-19 recovery
2. I was doing an interview yesterday for the Dow Jones and the reporter was telling me that some of the hedge funds are reluctant to buy gold because it almost seen as beneath the normally more exotic remit of a hedge fund. So, some folks are reportedly staying away from gold due to some kind of financial snobbery! That was a new one on me.
