What is driving the recent gold rally? As with any bull run, there are many factors -- hope that the Federal Reserve is about to get the easy money gravy train back on the track chief among them.
However, I have speculated that one of the underlying reasons for the recent rise in the price of gold isde-dollarization driven by the weaponization of the dollar. You might find this idea far-fetched, but it isn't as fringe as you might think. One thing is certain: somebody is buying gold right now. The yellow metal set a record of just over $2,195 per ounce last week, and records aren’t just falling in dollar terms.
White points out that “persistently large fiscal deficits threaten to further erode its real value and lead to more inflation.” “Central banks everywhere are quite possibly uneasy about owning too many dollars when the US is running large, inflation-causing fiscal deficits. The dollar is structurally overvalued on a purchasing-power-parity basis versus the main DM currencies.” White says the trend is toward “dollar underperformance” in the coming years.
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