How to Play US-China Cold War 2.0? Clue: It Glitters.
Just what is causing gold prices to shoot to the moon, and is it too late to invest?
I've sold all my crypto since the halving event. It is hard to think of a catalyst for crypto now. Even harder to think of a use case.
Now I'm debating whether to plough the 78% gains in crypto over 6 months into something else. Perhaps gold, the new crypto?
Let's consider the investment case for gold.
Gold prices have rallied to a fresh record of over US$2,400 per ounce. Most of the ferocious rally took place in 2024.
This has actually outpaced the 5-year return of the S&P 500. US stocks, led by the tech, have rallied 76% in 5 years. Gold has rallied 82% in the same period.
Who is buying Gold, and why?
It's fair to say someone is buying gold in huge quantities.
Costco, a US retail giant, reports selling US$200 million of gold bars to retail customers every month in 2024. Last year, it was selling US$100 million every quarter.
But far and away the biggest buyer of gold is China.
The People's Bank of China led global central banks in buying record amounts of gold, above 1,000 tonnes each year.
Why? Emerging market central banks have been trying to diversify away from USD and Euro denominated reserves. This accelerated after the US sanctioned billions of US dollars worth of bonds held by Moscow as reserves.
Chinese retail investors and hedge funds, seeing negative returns in stocks and property, have also piled into the gold rush.
Gold's traditional inversion with real yields has broken down
The intense gold buying by China has led to gold's traditional relationships breaking down.
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