A reflection of the times?

Ulf Lindahl, CEO of Currency Research Associates, believes that central banks’ demand for gold is an indication of their decreasing reliance on the dollar.

According to Lindahl’s email, central banks seeking to reduce their economic dependency on the US are finding the dollar to be less and less tempting.

According to a March JP Morgan research note, non-US allies may hoard gold to “mix away from dollars” and lessen their susceptibility to sanctions.

The memo claims that the increase in gold prices since 2022 has been fueled by central bank purchases. According to JP Morgan, central banks bought more gold in 2022 than they did on average over the previous ten years, suggesting that gold may be heading into a prosperous period.

Prices are rising in response to US Treasury Secretary Janet Yellen’s visit to China, where she discussed financial stability and what she dubbed the overproduction of electric vehicles in China.

The US economy is at risk due to rising oil costs, as noted by Moody’s chief economist, Mark Zandi.

The UBS research report states that higher oil costs will probably increase inflationary fears, which will raise the price of gold.

The common understanding of gold

The increase in gold prices indicates that investors are expecting rate reductions from the Fed later this year, but they may be unsure of their ability to contain inflation without causing a “soft landing” or recession in the US economy.

In a research note dated April 9, UBS stated that it believes the likelihood of Fed rate cuts is “still the main driver for bullish sentiment toward gold.”

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In statements on April 3, Fed Chair Jerome Powell stated that rate cuts to rebalance the economy are probably going to start later this year and that inflation is still moving toward the Fed’s target of 2% on a “sometimes bumpy path.”

According to statistics from CME Group, 51% of investors presently anticipate a quarter-point decrease in June. However, March’s employment growth figures surpassed forecasts, raising doubts about the necessity of several rate decreases in the face of a robust economy.