I'm going to share my prespective on the Gold price and what is driving it fundamentally and then i'll go into specifics about who is trading it, why, where are they buying and ultimately what I think it will happen to Gold.
First lets go back to the start of the year 2021.
I was very bullish on Gold at the start of the year as many were, the failure of gold to follow a very impressive rally in the commodaties sector should have been a big warning sign instead of being seen as the biggest opportunity to profit, and precluded to what will happen next.
But in terms of fundamentals, the commodaties very agressive rally, only made sense that precious metals would go even higher, there is no way a bag of corn is worth more than a bag of gold right?
Now the first mistake with the previous analysis, in my view, originates from a very unexpected place, and thats the social-economic intensification of wealth inequality.
What do I mean by this? Who is holding, trading and moving prices in the gold market for the past 10 years?
It sure is not retail, as it is a market complety dead between 2010-2020, It's headg-funds with billions of buying power, speculating about the price of gold, meanwhile for example bitcoin was being hold by retail, i would say people who are into development of software.
This fact is very important by itself, before any hedge-fund, wealthy person, had put a single dollar into bitcoin, the majority of bitcoin was being hold by retail with no experience in trading, speculation, and some of them even buying pizzas for 10,000 bitcoin to prove its the future of internet money (they must have been thinking that internet money would be just a currency at BTC/USD is quoted at 1.5050 BTC per 1$ be expensive) like all forex market is quoted.
This is where the headlines like "X person who never traded a single dollar in their life is now a millionare because of bitcoin".
You can be sure that although retail could not move the price by hitting offers, they have for the sake of the argument, they sure could use 700 bitcoins to hit bids. This is why bitcoin when it crashes, its brutal, there is simply no professionals and wealthy people in this market, and the few wealthy people are professionals that manage risk and money, which know what is falling knife and the lack of experience of the public at large in the financial markets and price action, some people not even understanding a what price a candle is showing.
The next big reason is that the Gold market <insert market cap> which is several fold bigger than bitcoin at 1 jan 2021, what this means is that its bitcoin unlike of gold is very sensitive to any inflows of money, even a tiny bit would move the price a few hundred dollars. When did gold move from 1800 to 1750 in 30 minutes? I never saw that.
Now if we think of gold, we have the reverse of this situation, where wealthy people are holding gold, while the public can't even increase the price +1$ in inflows.
I think i made it clear why these 2 markets behave so differently when they in conceptual terms basicly are almost mirrors of themself, it's easy to see that bitcoin is just internet gold (nobody in their right mind will ever pay for a coffee with bitcoin).
But anyway, that was almost a tangent to the topic at hand.
Why is gold not following commodaties, i coud list a lot of fundamental differences between these two markets, but i'll just point out that gold is a rich people game with hedge-funds, while commodaties are probably the market most affected by supply and demand. Gold can go to 2000$ and nobody would be affected because you dont eat gold.
If we take a look at the year of 2020 and what central banks did, and what the public perceived of what was happening, when Jay Powel goes to 60 minutes and drops a bombs that probably 90% of the population doesnt know, that they create money by putting it on a excel sheet from windows office 2007 running on a computer with Windows XP.
(this is emberrasing)
So lets recapitulate what we have:
brrrrr memes and public mistrust of the FED to control inflation if it goes waywire, gold seems under-priced vs. commodaties, and follows that is only a matter of time before the public jumps into precious metals, even tho we just showed why that doesnt matter.
Now these specifics, allow me to bring finally why is gold going down.
The brrr meme could not break 2000$ on gold.
Right now the inflation fears can't even make gold jump to 1900$. Commodaties can't create a rally in gold, It's just depressive compared to the start of the year.
And as a thought experiment, can you imagine a better set of conditions for gold to put on an agressive rally? I can't. I simply can't make better a scenarios than this.
Now think about this, the really big surprise is gold going down to 1500$ and 1400$ while all of this is happening, it would be almost a shock.
Surprises is what makes the market moves, as soon as gold starts to sell-off, its over.
Thanks for reading, i hope my views on gold made sense to you, but as a homework please try to challange it.
(Also i know this text is full of gramar errors, but im too tired to clean it up.)
First lets go back to the start of the year 2021.
I was very bullish on Gold at the start of the year as many were, the failure of gold to follow a very impressive rally in the commodaties sector should have been a big warning sign instead of being seen as the biggest opportunity to profit, and precluded to what will happen next.
But in terms of fundamentals, the commodaties very agressive rally, only made sense that precious metals would go even higher, there is no way a bag of corn is worth more than a bag of gold right?
Now the first mistake with the previous analysis, in my view, originates from a very unexpected place, and thats the social-economic intensification of wealth inequality.
What do I mean by this? Who is holding, trading and moving prices in the gold market for the past 10 years?
It sure is not retail, as it is a market complety dead between 2010-2020, It's headg-funds with billions of buying power, speculating about the price of gold, meanwhile for example bitcoin was being hold by retail, i would say people who are into development of software.
This fact is very important by itself, before any hedge-fund, wealthy person, had put a single dollar into bitcoin, the majority of bitcoin was being hold by retail with no experience in trading, speculation, and some of them even buying pizzas for 10,000 bitcoin to prove its the future of internet money (they must have been thinking that internet money would be just a currency at BTC/USD is quoted at 1.5050 BTC per 1$ be expensive) like all forex market is quoted.
This is where the headlines like "X person who never traded a single dollar in their life is now a millionare because of bitcoin".
You can be sure that although retail could not move the price by hitting offers, they have for the sake of the argument, they sure could use 700 bitcoins to hit bids. This is why bitcoin when it crashes, its brutal, there is simply no professionals and wealthy people in this market, and the few wealthy people are professionals that manage risk and money, which know what is falling knife and the lack of experience of the public at large in the financial markets and price action, some people not even understanding a what price a candle is showing.
The next big reason is that the Gold market <insert market cap> which is several fold bigger than bitcoin at 1 jan 2021, what this means is that its bitcoin unlike of gold is very sensitive to any inflows of money, even a tiny bit would move the price a few hundred dollars. When did gold move from 1800 to 1750 in 30 minutes? I never saw that.
Now if we think of gold, we have the reverse of this situation, where wealthy people are holding gold, while the public can't even increase the price +1$ in inflows.
I think i made it clear why these 2 markets behave so differently when they in conceptual terms basicly are almost mirrors of themself, it's easy to see that bitcoin is just internet gold (nobody in their right mind will ever pay for a coffee with bitcoin).
But anyway, that was almost a tangent to the topic at hand.
Why is gold not following commodaties, i coud list a lot of fundamental differences between these two markets, but i'll just point out that gold is a rich people game with hedge-funds, while commodaties are probably the market most affected by supply and demand. Gold can go to 2000$ and nobody would be affected because you dont eat gold.
If we take a look at the year of 2020 and what central banks did, and what the public perceived of what was happening, when Jay Powel goes to 60 minutes and drops a bombs that probably 90% of the population doesnt know, that they create money by putting it on a excel sheet from windows office 2007 running on a computer with Windows XP.
Inserted Video
(this is emberrasing)
So lets recapitulate what we have:
brrrrr memes and public mistrust of the FED to control inflation if it goes waywire, gold seems under-priced vs. commodaties, and follows that is only a matter of time before the public jumps into precious metals, even tho we just showed why that doesnt matter.
Now these specifics, allow me to bring finally why is gold going down.
The brrr meme could not break 2000$ on gold.
Right now the inflation fears can't even make gold jump to 1900$. Commodaties can't create a rally in gold, It's just depressive compared to the start of the year.
And as a thought experiment, can you imagine a better set of conditions for gold to put on an agressive rally? I can't. I simply can't make better a scenarios than this.
Now think about this, the really big surprise is gold going down to 1500$ and 1400$ while all of this is happening, it would be almost a shock.
Surprises is what makes the market moves, as soon as gold starts to sell-off, its over.
Thanks for reading, i hope my views on gold made sense to you, but as a homework please try to challange it.
(Also i know this text is full of gramar errors, but im too tired to clean it up.)