traditionally, gold is a:
flight to safety, or a āsafe havenā ā unlike other commodities (i.e. oil, wheat), the amount (supply) of gold in the world stays constant
so, itās often seen as a reliable store of value
hedge against inflation
if one us dollar loses its purchasing power due to inflation, the value of the dollar gets eroded
but gold, as its supply stays constant, "maintains its relative value against the dollar", and naturally the price of gold, in dollars, goes up
but itās not always that simpleā¦
gold is still a commodity, one thatās sensitive to changing political landscape
within a week of russiaās initial attack on ukraine, gold price went up nearly 5%, which is a hugely volatile move for such a traditionally stable asset
imo: because of investors pouring money into safe haven due to unexpected geopolitical risks
but, this is was also around the time the fed began raising rates
especially as rates are going up this fast (the fed funds rate went from near zero to 4.25-4.50% in less than a year), it makes sense if investors were to sell their gold and instead pour into the dollar
so howās gold this year so far?
itās up ~5.7% as of writing, and there are a few potential reasons why
it's still lower than where it was at the onset of the russia-ukraine crisis, but the rise is an extension of the ~12% rally in the last two months of 2022
in the same timeframe (nov-22 till now), the us dollar index is down nearly 10% (UUP 0.00 is a retail friendly ticker to track)
notably, the us dollar has weakened 10%+ relative to the euro
that weakening is likely due to weak economic prospect in the us, at least for now
us retail sales fell by the most in a year in december, per the data released last wednesday
imo: this could be direct evidence that inflation will be receding for sure
š” something im thinking about
china's population fell for the first time last year since 1961 (click image)
