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Zero Hedge: Gold Surge Proves Central Banks Out of Control

Zero Hedge: Gold Surge Proves Central Banks Out of Control
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By    |   Thursday, 08 August 2019 09:31 AM

Gold’s recent price surge only goes to show inflation isn’t out of control, but the nation’s central bank is off the rails.

“If you believe gold tracks inflation or is some kind of inflation hedge, you need to think again,” Zero Hedge quoted Mike Shedlock writing for MishTalk.

“Only in hyperinflation or its mild form, stagflation, is gold an inflation hedge. But even then, both are synonymous with central bank stress,” Zero Hedge explained.

“Gold is a measure of faith in central banks that everything is under control. The global economy is choking on debt as central banks are determined to have more of it.”

Meanwhile, Goldman Sachs analysts predict that gold prices already at six-year highs will climb to $1,600 an ounce over the next six months as investors seek havens, Bloomberg explained.

The dimming global economic outlook, fueled by heightening trade tensions between the U.S. and China are boosting gold’s appeal as a hedge against financial turmoil.

“If growth worries persist, possibly due to a trade war escalation, gold could go even higher, driven by a larger ETF gold allocation from portfolio managers who still continue to under-own gold,” Goldman analysts including Sabine Schels said in a note Wednesday. “Gold ETFs have recently built momentum almost as strong as in 2016, and we believe that can be maintained in the short-term.”

Bullion holdings in ETFs climbed to the highest since April 2013 amid a financial market meltdown that saw more than $700 billion wiped from the value of U.S. equities on Monday. The argument for owning gold as protection to one’s wealth got louder after the market value of the Bloomberg Barclays Global Negative Yielding Debt Index closed at a record $15 trillion at the start of the week.

Last week, Bank of America Merrill Lynch analyst Michael Widmer said the metal could climb toward $2,000 in the next two years, as “the recent dovish tilt by central banks, accompanied by increases of negative yielding assets” provide a good backdrop that could sustain the rally. The metal reached a record $1,921.17 in the spot market in 2011.

“We believe that there are further cuts coming,” Widmer said Wednesday in a Bloomberg TV interview. “Talk about easing in other parts of the world as well, that drowns out everything else on the dollar, for instance.” Increased volatility could see gold prices spike above the bank’s base case forecast of $1,500, fueling the rally.

The precious metal climbed as much as 2.4% in the spot market on Wednesday to $1,510.46 an ounce, the highest since April 2013. On the Comex in New York, futures touched $1,522.70, before settling at $1,519.60 at 1:30 p.m.

For his part, President Donald Trump said on Wednesday the U.S. Federal Reserve must cut rates “bigger and faster” for the United States to be competitive against other countries, Reuters explained.

“Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much (and that I was right!). They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW,” Trump said in a series of Twitter posts.

The Republican president has, for months, been calling on Fed Chairman Jerome Powell and Fed policymakers to lower interest rates to support the U.S. economy.

White House trade adviser Peter Navarro on Monday urged the Fed to cut key rates by another three-quarters of a point to a full point by the end of the year to bring U.S. rates in line with rates elsewhere.

Material from Bloomberg and Reuters has been used in this report.

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Gold’s recent price surge only goes to show inflation isn’t out of control, but the nation’s central bank is off the rails.
gold, central, banks, price
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2019-31-08
Thursday, 08 August 2019 09:31 AM
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