The Kobeissi Letter highlights a physical surge in unprecedented gold buying, with inventories in the three largest COMEX gold vaults increasing by 15 million ounces (a 115% rise) in just two months, surpassing levels seen during the 2020 pandemic. January alone saw record-breaking deliveries of over 19,000 contracts, signaling extraordinary demand. While COMEX inventories rise, London vaults are being depleted, with withdrawal times extending to eight weeks. The U.S. has also shifted from being a net gold exporter to a net importer as of late 2024. These developments coincide with a sharp 40% increase in gold prices over the past year, despite rising interest rates and a strong U.S. dollar—an anomaly in historical trends. Additionally, net long futures positions for gold are surging, while short positions are at their lowest since 2020.
China’s central bank has been consistently purchasing gold, while assets in Chinese gold ETFs have tripled in 18 months, reaching $9.5 billion. Gold’s performance has been remarkable, doubling the S&P 500’s return (+22%) over the past year, despite stocks rallying strongly—an unusual occurrence for a traditional hedge asset. Analysts attributes this surge to inflation fears, geopolitical uncertainty, and excessive U.S. deficit spending ($838 billion borrowed in the first four months of FY 2025). With bond prices under pressure and money supply growing at its fastest pace since 2022 after a historic contraction, gold’s role as a global hedge against economic instability and uncertainty appears stronger than ever.
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