Gold prices rebound on Iran ceasefire. Here’s why.
00:00 Speaker A
We’re seeing a little bit of a lift in metals overall, gold, silver, even more so in palladium and platinum. But what are you taking of this big picture?
00:10 Speaker B
I think we can uh see the market trying to price in the uh possibility of a uh Fed rate cut by the end of the year, sneak that one back into the forecast. uh after um calling calling it for dead a few weeks ago with the rise in oil prices and I think that’s part of the the bid under under some of the metals. Although they’ve had quite a sell off in in March, so a a bit of a bounce was well due.
00:44 Speaker A
Some of the biggest uh buyers of gold have been central banks and this is a trend that started 10 years ago with de-dollarization. A bunch of central banks around the world have participated in this over the last five years, but I understand they’ve been pulling back a little bit.
01:05 Speaker B
Well, there’s one in particular, it was Turkey. Turkey sold some and technically they didn’t sell, they swapped gold for US dollars and euro in order to fund their economy which in an economy that imports almost all of its oil and oil products, that means that they were um getting currency to to buy oil at the higher prices. So, um, not exactly a a tough choice to to to buy gold for your economy or oil for your economy, oil won. But the the interesting thing is that China actually used the sell-off in gold to buy more gold in March than they have any other month since uh January 2025. So, there’s a dip buyer even if ETF ETF investors weren’t uh until today.
02:00 Speaker A
Aside from central banks, ETF buyers have really rocketed this market, the gold market higher over the last few years. Uh, what are the dynamics at play there? Because it looked like they were kind of out of the market in March. Uh, what do you think takes uh them back into the market? Is it just speculation? Is it going to take the price of gold to reach a certain level? Where do we see the ETF buyers coming in?
02:26 Speaker B
Some of it’s momentum, although I wish more of it was momentum because they wouldn’t have sat out uh so much of the oil of the gold price rally over the last couple of years. But um, I think it really, they still are using the playbook that gold moves based off of real rates, real interest rates. So, nominal rates minus inflation creates the opportunity cost for gold, which of course doesn’t have a yield. Um, that’s the benefit of it. It’s the only currency that isn’t someone else’s debt.
03:03 Speaker B
Now the problem with real rates is that you have nominal rates which adjust every day and then you have the real portion of the rate that when you subtract inflation, that only comes out when CPI comes out. So,
03:36 Speaker A
That’s once a month.
03:38 Speaker B
Yeah, there’s a delay. and so uh it may have looked like real rates were rising for in and justified the selling, but it’s just because the nominal rates were moving and the inflation rate was stagnant.
