Why Persistent Inflation Isn’t Enough to Prevent a Plunge in Gold Prices
This analysis from Yahoo Finance explains why persistent inflation is failing to boost gold prices, contrary to historical norms. Spot gold has plunged over 25% from its all-time peak near $5,600 per ounce, breaking below the $4,000 threshold. The key reason is opportunity cost: gold is a non-yielding asset, and with the Federal Reserve under Chair Kevin Warsh maintaining a severely restrictive monetary policy, real yields are attractive elsewhere. A surging US dollar, driven by global capital inflows, is making gold more expensive for foreign buyers, reducing physical demand. Additionally, Western institutional investors are rotating out of gold ETFs into high-yielding short-term debt and equities. The article also notes that gold mining stocks face a double-whammy from falling gold prices and a pressured stock market, making them particularly vulnerable.
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