The sharp decline in gold prices last week has triggered heated debate among market participants.
The bulls argue that this is just another dip within a secular bull market. They say that poor liquidity and CTA stops in futures markets primarily drove the reversal. Meanwhile, the more consequential demand from ETF investors is resilient and the physicals/ETF premia remains wide.
But others are more cautious. They argue that real rates, which gold prices have tracked, cannot keep falling forever. If a COVID-19 vaccine is found early and inflation continues to recover, DM central banks may become less enthusiastic to add accommodation.
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