
All That Glitters
The yellow metal continues to shine.
Shown below, courtesy of 3Fourteen Research, is an equal weighted gold index, represented by the teal line, comprising major currencies (USD/EUR/GBP/JPY/AUD/CAD/CNY/CHF), rebased to January 1, 2020.
The equal-weighted basket has recently broken out to the upside:
To recap, 2024 was the first calendar year in recorded history that gold achieved a +25% return in the face of a +5% move higher in the dollar index.
This, despite negative net gold ETF flows in 2024.
Further gains YTD in the face of rapidly rising real yields and the absence of the retail investor is impressive price action.
A new marginal buyer has emerged. We have witnessed record central bank gold buying since the third quarter of 2022, seemingly triggered by America’s decision earlier that year to freeze Russia’s foreign exchange reserves (marked in the chart by the red square).
Global central banks including Poland, Turkey, and India, bought a record net 1,082 tonnes of gold in 2022, a net 1,049 tonnes in 2023, whilst a net 684 tonnes was purchased in the first three quarters of 2024 according to the World Gold Council.
(Cover Image Source: Alexander Grey)