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Norman said the “conventional explanation” is that gold is rallying ahead of an expected rate cut at the June Fed meeting, which would weaken the dollar and strengthen gold, “but the dollar is actually up YTD and silver is not validating the move higher in the complex as evidenced by a decline in the gold/silver ratio as we would have expected.”
“A significant part of the answer is of course Chinese buying and not just the traditional 'dama' or Chinese grandmothers - Gen Z investors have joined the fray,” he wrote. “But Chinese premiums are slipping as have Indian premiums suggesting Asia is behaving in a moderately price-elastic manner and easing back on purchases in the face of price strength.”
“The velocity and the speed were very sudden, very fast,” Steel said. “It didn’t seem to have a smoking gun.” The report noted that gold’s recent rally has also highlighted the growing disconnect between spot prices and gold-backed ETF outflows. “Holdings in SPDR Gold Shares, the world’s largest such ETF, fell by 0.3 per cent on March 4, taking the total to the lowest level since July 2019, according to data compiled by Bloomberg,” they wrote.
Spot gold hit a high of $2,150 per ounce around noon EST as Fed Chair Jerome Powell presented the central bank’s semiannual Monetary Policy Report to the U.S. House Financial Services Committee. It last traded at $2,148.90, up 0.84% on the day at the time of writing.
Source: Financial Digest (financialdigest.net)
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