Huge Gold News From China & Central Banks! Gold & Silver Prices Will Change Forever - Mike McGlone
Huge Gold News From China & Central Banks! Gold & Silver Prices Will Change Forever - Mike McGlone
Mike McGlone, senior Macro Strategist for Bloomberg Intelligence, observes that gold continues to rise, supported significantly by central bank purchases, especially from China. He notes that stabilization in gold ETFs could further bolster this upward trend. Unlike silver and copper, which are more influenced by industrial demand, gold's appeal as a safe-haven asset makes it less susceptible to the same economic pressures.
Gold has recently rebounded, trading in the $2,340s on Thursday. This increase is attributed to a weaker US Dollar following the second estimate of US GDP data, which was revised downward due to reduced consumer spending. The annualized US GDP growth for Q1 was adjusted to 1.3% from an initial estimate of 1.6%, falling below Q4's 3.4% but matching analysts' expectations. This revision led to a decline in US Treasury yields, positively impacting gold prices.
McGlone highlights that with inflation above target and a robust stock market, the Federal Reserve will unlikely ease monetary policy soon. This scenario supports gold as a hedge against inflation but poses risks for more economically sensitive metals like silver and copper.
On Friday, gold prices eased as investors digested a US inflation report essentially in line with estimates. Despite this, expectations that the Federal Reserve will cut interest rates later this year kept bullion on track for its fourth consecutive monthly gain.
McGlone also points out that China is experiencing significant deflationary forces, as evidenced by declining bond yields. This suggests weaker economic conditions, which can negatively impact the demand for industrial metals such as copper and silver. In response to these conditions, China has intensified its efforts to combat investor speculation on an extended rally in government bonds, hinting that the central bank may sell some of its holdings to cool the market.
Economist Mike McGlone notes that the stock market's rise contributes to persistent inflation, which makes the Federal Reserve hesitant to ease monetary policy. This hesitation stems from easing, which could counteract the Fed's efforts to control inflation.
According to government data published on Friday, the US Federal Reserve's preferred measure of inflation remained unchanged in April. Despite elevated services prices, the Fed is likely to keep interest rates high throughout the summer. This approach balances the central bank's desire to begin easing monetary policy with the need to reduce inflation towards its long-term target of two percent.
On Friday, U.S. stocks rose, returning from Wall Street's worst day since April. The S&P 500 gained 36.88 points, or 0.7%, to 5,304.72, reclaiming all its losses from the previous two days.
McGlone suggests that a market correction could shift investor behavior from outflows to inflows in gold ETFs as investors seek safe-haven assets. This shift could boost gold prices, highlighting the ongoing interplay between stock market performance, inflation trends, and investor strategies in response to economic conditions.
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