2023-05-23 18:00:00
A decline in US yields and the dollar
According to Invesco, the rise in the value of gold is due to falling yields on US Treasuries and the dollar. The phenomenon is not surprising, but it also held up in early 2022, as real yields and the dollar rose.
The reasons for this resistance
Invesco identifies three likely reasons for this resistance: first, rising inflation, although the relationship between gold and inflation is more complex than one might imagine; second, central banks bought record amounts in 2022, perhaps due to inflation (Turkey) and geopolitics (Russia); finally, the collapse of cryptocurrencies may have eliminated a rival candidate as a store of value.
What future for gold?
Invesco believes gold is expensive by post-1870 standards, but finds it hard to imagine it can continue to rise over the long term. The only glimmer of hope for the “bulls” would be the possibility of a return to some form of gold standard. According to Invesco’s calculations, if US reserves were to guarantee the cash in circulation in the United States, it would have to be valued at more than $8,800 an ounce.
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