Gold Trajectory ( for when we pour our ore )28 Aug 2024 07:58
Gold is soaring on fears of the disaster Harris plans to inflict on the world
Unchecked spending is undermining the dollar’s status as the world’s reserve currency
Matthew Lynn
Picture of Matthew Lynn
It has already punched through $2,500, the highest price it has ever reached. Over the next month, it may well go to $3,000 or perhaps even higher. Gold has entered a new bull market, with investors piling into the precious metal. There are plenty of conventional explanations for that, from the prospect of falling interest rates, to strong buying from Chinese and Middle Eastern central banks.
But there is a far bigger one that we should be paying more attention to. This could be the “Kamala Trade”. Kamala Harris has cruised to the Democratic nomination on a wave of vibes, and that may well take her all the way to the White House. And yet she is also certain to continue the wild spending and soaring deficits of the Biden presidency.
The dollar may be about to be debased and gold has always been the hedge against that. It is an early warning of the potential catastrophe she is about to inflict on the global economy.
The artificial intelligence stocks might grab the headlines, along with tech companies and commodities. But there has been only one real stand-out asset in 2024 so far and that’s gold. From $2,000 an ounce at the start of the year, it reached $2,500 last week, and may keep on climbing higher. It is now well above the highs it reached at the height of the eurozone crisis, and shows little sign of slowing down.
To the mainstream analysts who follow the precious metal, there are a host of reasons for that. The US Federal Reserve is expected to cut interest rates in the autumn and that always boosts the gold price as the metal does not pay any interest. There is plenty of geopolitical uncertainty around, with conflicts in the Middle East, and the war between Russia and Ukraine escalating.
And of course, central banks have increased their holdings. “Led by China, central banks purchased 1,037 tonnes of gold in 2023,” claimed a recent note from JP Morgan on the soaring price. “In the same vein, 2024 has started strongly with net purchases of 290 tonnes in the first quarter – making it the fourth strongest quarter of purchases since the buying binge began in 2022, according to the World Gold Council.”
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