HUGE News From CHINA & Central Banks! Gold & Silver Prices Are About to CHANGE FOREVER - Adrian Day
The past few weeks have seen an incredible surge in gold prices, setting the path for record-high closings above 2400 dollars. This unexpected rise has largely been triggered by the markets' anticipation of the Federal Reserve cutting down rates soon. Central banks in markets such as China, India, and Russia are tending to increase gold reserves to avoid being too dependent on the USD. In addition, Turkey has a large gold hoard in the context of hyperinflation, and Poland is also the central bank's net gold buyer.
Adrian Day of Adrian Day Asset Management said that while things aren't quite as strong as they appear, and we might anticipate them worsening, the plain fact is that the current macroeconomic environment is negative for gold. The sentiment in the West is still pretty negative, he added. Gold fell more than 2% on Thursday after a better-than-expected reading on U.S. gross domestic product fed the potential for higher-for-longer U.S. interest rates, which contributed to a drop in the price of the precious metal to the lowest level in more than two weeks.
Considering the holding rate of countries in gold reserves worldwide, the U.S. holds the most, with more than 8,100 tonnes, equivalent to 22.85 percent of gold reserves worldwide. The next is Germany, with a 9.41 holding rate. China, which has been continuously increasing its reserves recently, is holding only 6.36 percent. Recently, when China reduced its purchasing of gold, India still maintained a purchasing power of 4-6 tonnes per month. At the same time, the Central Bank of India also has the motivation to reduce its dependence on the USD by directly joining the BRICS bloc - a counterweight to the U.S. and European countries.
Adrian mentioned that the factors driving gold recently include central bank buying due to dollar weaponization and Chinese investors purchasing gold out of concern for the banking system. These buyers are not influenced by the macroeconomic environment, which is not the primary reason for their gold purchases. "I don't think the gold price is pricing in rate cuts at the moment because central banks and Chinese buyers, who are the primary buyers, don't care about the Fed's rate cuts," he noted.
The U.S. Dollar Index, which measures the value of the U.S. Dollar against six other major currencies, retraces its recent gains ahead of the release of the U.S. Personal Consumption Expenditures Price Index for June. Stronger U.S. economic data have reduced some rate cut expectations for September, which might provide support for the Greenback. All precious metals, including gold, see sharp declines.
Adrian Day thinks that any of these scenarios are overwhelmingly likely in the next six months. When the macroeconomic environment starts to shift, ordinary investors and small institutions will turn towards gold. He thinks that when companies start to report their second-quarter earnings later this month, we will see some very attractive cash flow numbers—better than those of the first quarter and the year-ago comparisons.
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