While gold has been grinding higher, it hasn’t soared yet despite raging inflation and rolling-over stock markets. The main reason has been the lack of investment capital inflows. But long-apathetic investors are starting to return, flocking back to gold exchange-traded funds as the US stock markets threatened a correction. That buying is a bullish gold omen, fueling upside momentum that will attract in more investors.
The bottom line is, investors have finally started returning to gold after ignoring its young upleg for several months. As stock markets plunged on the uber-hawkish Fed threatening rate hikes and QT, differential demand for major-gold-ETF shares soared. That triggered a sharp reversal in their holdings, heralding an accelerating investment-demand-driven gold upleg. Investors love chasing gold upside momentum.
Their buying feeds on itself, pushing gold higher fueling even more investment demand. That should only grow as these QE-levitated stock markets roll over into a long-overdue bear on the coming Fed-rate-hike cycle and QT. The raging inflation the Fed’s reckless QE4 money printing unleashed, and the resulting deeply-negative real rates, will greatly boost gold investment demand. Gold will return to favor in a big way.
Adam Hamilton explains more in this article.