<<Read Uncharted '20s, Part IIt’s interesting that the dollar yield of gold (the yellow line on the chart below) hasn’t lagged behind the Sensex and S&P 500 indices since the beginning of this decade, which are leading the way in the world’s largest economy stock indices. This is happening despite a significant increase in interest rates, which is traditionally seen as a negative factor for the price of gold.
The explanation is quite simple. Gold is a ‘neutral’ asset; you can buy and sell it in any currency, and it doesn’t care about who wins a major war or whether Pax Americana shifts to Pax Sinica. Gold allows you to weather the most uncertain times relatively safely.This hypothesis is supported by the rapid increase in demand for gold from central banks. According to WGC data, in the first 9 months of 2023, official sector gold purchases reached 800 tons, more than in any January to September period since 2000. It’s highly likely that, by the end of the year, they will surpass the historical record set last year, which was 1,136 tons.
More By This Author:Uncharted 20s
Who Benefited From The Introduction Of The Euro?
Geopolitics And Stock Markets. The Fall Of Communism.
