What's Driving Gold? Central Banks And Hedging Are Key Factors
- In past decades, a simple two-factor model was relatively robust for estimating gold’s “fair value”: the US dollar and real interest rates.
- For several decades, this relationship was relatively robust. But recent history has upended this relationship.
- What’s driving gold these days? Two factors deserve to be on the short list of likely candidates: central bank purchases of the metal, and hedging strategies designed to offset blowback in a dangerous world.
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Prior to the last several years, modeling the gold market was relatively straightforward. But a lot has changed in recent history, and so has the mix of factors that are front and center in gold’s price trend.
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