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🦧 gold digging late
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🦧 gold digging late

Ape of Omaha
Jan 23
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🦧 gold digging late
www.wiseape.fyi

traditionally, gold is a:

  • flight to safety, or a ā€œsafe havenā€ – unlike other commodities (i.e. oil, wheat), the amount (supply) of gold in the world stays constant

    • so, it’s 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 it’s not always that simple…

  • gold is still a commodity, one that’s sensitive to changing political landscape

    • within a week of russia’s 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 how’s gold this year so far?

it’s 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

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šŸ’” something im thinking about

china's population fell for the first time last year since 1961 (click image)

as always, i’m no financial advisor! (i’m no substitute for professional financial services)
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