To: bull_dozer who wrote (208911 ) 11/14/2024 8:55:10 PM From: TobagoJack Respond to >> THE F*CKING F*CKS from behind paywall https://www.zerohedge.com/precious-metals/three-reasons-behind-recent-plunge-gold The Market Ear pointed out today , gold has not seen such a big 7 day down move since Covid... This market is NOT worried about US credit risk. If the market was becoming concerned about excessive fiscal deficits, fiscal dominance and a loss of central bank independence in the US, gold would be the first thing that would be going up. This is of course also reflected in the very muted moves in US term premia and inflation break-evens so far. We DB sees gold price action as confirming the argument it has been making throughout the year that "the US is not at risk of a twin deficit currency crisis any time soon." Demand for gold reserves from central banks is going down. The reasoning here is simple: Trump policy is likely to put weakening pressure on many emerging market currencies most notably CNY. By extension, many central banks now need to spend dollar reserves to defend their FX from capital outflows and prevent excessive weakening. While it is certainly true that Asian central banks have been diversifying their holdings in to gold, they now have to spend more of these dollars defending their currencies instead. The USD remains the pre-eminent safe-haven currency of choice. Some have been arguing that the dollar's appeal is in structural decline, with the weaponization of sanctions and trade a key driver. In contrast, DB's view has been the opposite: while public sector demand for dollar assets might be dropping, private sector demand has been rising and matters much more: the greater the risk a government gets sanctioned by the US, the bigger the net demand for dollars . Price action since the US election victory is therefore not only consistent with a rising risky asset demand for US assets (US over global equities) but safe-haven demand too (dollar up against all global FX and gold).
