RE:Gold being bought overseas? "It’s often difficult to pinpoint exactly what’s driving markets, particularly deeply liquid ones like gold, the U.S. dollar and U.S. stocks. That said, Capital Economics’ Iovanel offered two possible explanations that might help to explain the unusual trading action of late.
Having moved on from “growth scares” that rattled stocks over the summer, many investors now expect the U.S. economy will continue expanding at a brisk pace, outstripping growth rates in other developed markets like Japan and Europe.
One consequence of this is that inflation might persist above the Fed’s 2% target. This could help explain some of the unusual relationships playing out across stock and bond markets, as the U.S. economy has so far defied economists’ expectations at seemingly every turn.
The looming U.S. presidential election has also likely played a role, Iovanel said. Shifting perceptions surrounding former President Donald Trump’s chances of victory have prompted investors to consider how his policies might influence the economy, and by extension, markets.
The bottom line is that “there’s a higher likelihood that’s priced into the market that growth will be stronger, and that inflation will not stay at target as anticipated,” Iovanel told MarketWatch.
Others, including Matt and Mike Thompson, co-portfolio managers at Littler Harbor Advisors, have attributed the jump in the VIX in October to jitters surrounding the election.
Some say the expectation of more persistent inflation has also helped contribute to the rally in gold. But according to Suki Cooper, executive director of precious-metals research at Standard Chartered, there are other reasons as well.
Buying from central banks helped get the rally in gold started. But the yellow metal has also benefited from an increasingly uncertain geopolitical backdrop, Cooper said.
“There has been almost a re-evaluation of gold’s role within a portfolio,” Cooper said. “Because we have had a series of ‘black swan’ events, from COVID to Russia’s invasion of Ukraine — there have been a number of things that have driven investors to have a certain allocation to gold in their portfolios.”
Markets are moving in mysterious ways — and Wall Street is struggling to explain why