Gold Price Surge: Analysis of Causes and Background
1. Gold Price Up 70% in One Year
- Typically, gold prices rise with inflation, but this surge is highly exceptional.
- It tends to move in the opposite direction of the dollar's value, but the rapid rise in gold prices despite a strong dollar is unusual.
2. Hoarding and Increased Gold Demand
- Hoarding is occurring in Korea, including gold, silver, and even copper.
- Currently, domestic gold prices are more than 20% higher than international prices, creating a 'Kimchi Premium' situation.
- Generally, the emergence of a Kimchi Premium is interpreted as a signal that the asset is nearing the end of its upward trend.
3. Global Gold Holding Trends: Central Banks and Wall Street Buying Gold
- Recently, central banks and Wall Street have been actively participating in gold hoarding.
- Last year, China was focused on buying gold, but this year, the United States has begun buying gold in earnest.
- The reason for transporting gold from Europe to the US Federal Reserve is uncertain but could signal a significant change.
4. Gold Outflow from the London Gold Exchange
- The London Gold Exchange is the world's largest gold market, but its gold reserves are currently declining rapidly.
- Moving gold deposited in London to the United States is exacerbating the global gold supply and demand imbalance.
- In particular, some analysts note that this process exhibits trends similar to those observed before the Great Depression or wartime.
5. Trump Risk and Gold Prices
- Gold prices have surged since Trump's election due to protectionist policies (imposing universal tariffs).
- Gold holdings in the New York Mercantile Exchange have increased by 75% in three months.
- The possibility of tariffs on gold has prompted market participants to rush to buy, accelerating the price surge.
6. Gold Price Increase and International Economic Flows
- Historically, gold prices were based on mining costs, but the preference for safe assets has strengthened since Trump took office, further raising prices.
- Gold mining companies are increasing production accordingly, suggesting the potential for increased gold supply in the future.
7. Gold Holding Issues of the US Treasury and the Federal Reserve
- The Federal Reserve does not officially hold gold but transferred all gold to the Treasury in 1934 and received gold certificates in return.
- The current valuation of gold held by the US Treasury is only $750 billion, but reflecting recent gold price increases, it could increase to $7.5 trillion.
- With congressional approval, the Trump administration could increase fiscal spending without additional debt, which is a strategic advantage the US gains through rising gold prices.
8. Future Prospects and Risks
- If Trump announces the reintroduction of the "gold standard," gold prices could skyrocket.
- Conversely, if gold prices surge and then plummet, market shock is inevitable.
- Realistically, if Trump uses this to stimulate the economy without debt, it could significantly impact global financial markets.
< Summary >
- Gold prices have risen by 70% in one year, creating an exceptional situation.
- A scramble for gold by central banks, Wall Street, and individual investors is causing a gold supply and demand crisis.
- Trump's protectionist policies and the movement of gold to the United States are major factors in the surge in gold prices.
- The potential revaluation of gold held by the US Treasury may support the rise in gold prices in the long term.
- The possibility that rising gold prices will be used to stimulate the economy exists, and increased volatility is expected in global financial markets in the future.
[More…]
1. The Impact of Rising Gold Prices on the Global Economy 👉 https://nextgeninsight.net/?s=%EA%B8%88
2. Trump Policies and Changes in the Safe Asset Market 👉 https://nextgeninsight.net/?s=%ED%8A%B8%EB%9F%BC%ED%94%84
*YouTube Source: [Jun’s economy lab]
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