To The Moon

The US economy is on the verge of recession and the pause of the rate-hiking cycle is imminent!

On the Asian midday of April 13th, gold prices move sideways, maintaining near their high since March of last year. Previously, weaker-than-expected US CPI stimulated people's bets on the Fed's early pause in rate hikes. Meanwhile, concerns about economic recession continue to intensify and make capital flow into safe assets.

Gold has continued to strengthen this week after breaking through $2000 per ounce, with a gap of about $50 from the historical high point in 2020.

What is Gold ETF - Meaning, Purpose, Risk, How Gold ETFs Work

1. Gold maintains near the high level, outperforming broader market

In March, due to bank run, traders flooded into traditional safe assets, pushing gold up for a month.

According to data from etf.com, $SPDR Gold Shares(GLD)$ is the largest gold ETF, with assets under management of over $60 billion, followed by $iShares Gold Trust(IAU)$ with assets under management of over $28.8 billion, and $SPDR Gold MiniShares Trust(GLDM)$ with assets under management of over $6.2 billion.

The rise of gold funds has exceeded 10% so far this year.

Data source: ETF.com

From 2023 to the present, the performance of gold ETFs has been better than that of the $S&P 500(.SPX)$. As the Fed aggressively raised interest rates to deal with persistently high inflation, $Gold - main 2306(GCmain)$'s performance in 2022 was much better than that of stocks and bonds.

Compared with their performance in 2022, $SPDR Gold Shares(GLD)$ only fell 0.8%, while $SPDR S&P 500 ETF Trust(SPY)$ fell 19.5% and $iShares Core U.S. Aggregate Bond ETF(AGG)$ fell 13%.

2. Gold may continue to rise after the release of Mar. CPI and FOMC minutes

Better-than-expected US CPI has driven the latest rise in gold prices as the market begins to bet that the Fed will stop raising rates as early as June.

At the same time, FOMC mintues also showed that policymakers are considering pausing interest rate hikes and that they also suggested that the economy may experience a mild recession later this year. Following the banking crisis, rising interest rates will weaken economic growth.

Although concerns about the banking crisis have eased, market concerns about a possible economic contraction in the US this year have strengthened, also supporting gold. The FOMC minutes also reinforced concerns about a recession.

In addition to the further boost to gold prices that a deteriorating economic situation may bring, the weakness of the US dollar and US Treasury yields has also supported gold. The US dollar fell after the release of inflation data on April 12th and approached a low point of two months.

As of SGT 17.46, the gold futures price rose by 0.53%, to $2040.1 per ounce.