GoldNuggets — China, Banks & Bonds
China is back in the market, Central bank buying into 2025, Gold vs Bond market echoes, and Work required to buy gold...
China is Back
The People’s Bank of China is back in the gold market: "the decision to increase gold holdings, particularly following Trump's recent election victory, reflects the PBOC's proactive approach to safeguarding economic stability amid evolving global conditions,"
It also comes as China’s main economic policy working group held a key meeting where they flagged a more aggressive easing stance heading into 2025 (changing the Monetary Policy stance to “Moderately Loose“ — the last time they used this term to describe policy settings was in 2008, so it does mark a significant change).
The Next Steps
"Gold's rally could extend through 2025 on the back of falling rates and persistent central bank demand."
The key swing factor will be when or if investor/speculator demand steps up, as central bank buying has so far been the main driver of strength.
Gold Bottoms and Bond Bottoms
For a number of good reasons, gold and bonds tend to bottom at similar points in the cycle (both are heavily influenced by risk sentiment and monetary policy settings), albeit with sometimes considerable variation in performance (due to other factors like inflation risk and central bank transactions).
This is one reason why gold and bonds can be used interchangeably in the 60/40 portfolio (“diversify diversifiers”)
Hours of Work required to Buy an ounce of Gold
Based on the November payrolls data it takes the average worker in America approximately 75 hours of work (or about 2 weeks) to buy 1 ounce of gold.
That compares to about 15 hours back in 2001.
It raises the issue that the gold price may be getting overvalued/expensive, but perhaps more poignantly it probably makes you think maybe it would be better to be paid in gold than US dollars (!)
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