god help you if you tried to short gold this
year the analog version of Bitcoin just posted its best Q1 return since 1975 we’ve seen Wall
Street’s price targets obliterated raised and obliterated all over again so today we ask for
the eenth time is the top how is this thing still going what’s driving the price of gold and
why my name is Nick and stay tuned to find out all the answers gold has nominally broken the new
all-time highs more than 25 times in 2025 it’s a rally that seems to have no end and it’s all very
exciting and maybe even a little unsettling until you check out the price of gold in real terms
that is the value of gold is typically measured in US dollars but since the purchasing power
of the US dollar erodess over time you need to adjust for inflation to find the real price of
gold as it so happens gold’s previous all-time high in real terms was set in January of 1980
when it hit $850 an ounce and this followed an extraordinary bull run in the 1970s that saw gold
10x in dollar terms amid runaway stagflation and uh by the way if you’re still not sure what
stagflation is you can find out by watching our video right over here anyway a decade of global
macroeconomic shocks and wage price spirals in the 70s caused US inflation to reach as high as
13.3% in 1980 undermining confidence in the US dollar and thereby driving up demand for gold as
a safe haven gold only topped when Paul Vulkar was appointed as the chair of the Federal Reserve and
set about crushing inflation by raising interest rates as high as 21% believe it or not but gold’s
price in real terms only recently surpassed the 1980 all-time high of $850 an ounce and that’s
$3,400 an ounce in 2025 which is quite crazy when you think about it gold breached this critical
level on April 21st when it closed the day at $3,424 it didn’t stop there though as the very
next day the price touched $3,500 an ounce and this proved to be a major zone of resistance
as sending gold tumbling back down to $3,200 but uh the dip got bought and price has since
bounced back up to close at $3,430 and counting in case it wasn’t clear enough the velocity
of gold’s uptrend has been increasing since the first week of April when Trump’s Liberation
Day market crash put a floor under gold at around $2,980 the chart continues to make higher lows
suggesting the market is still in a buy the dip mode however at the time of making this video
we can’t ignore what looks like a perfect double top on the daily time frame and on the weekly time
frame a huge zone of resistance above $3,330 where price has been rejected for 4 weeks in a row now
at first glance it looks like gold is starting to get a bit toppy and if you need further evidence
of this then consider that we recently saw Goldman Sachs and JP Morgan announcing that they were
significantly up in their gold price targets for 2025 to $3,675 and up to $3,900 an ounce
respectively funnily enough both announcements were released on April 22nd just as gold rallied
to $3,500 an ounce and was sold off aggressively so it’s uh clearly a top signal right well uh
not necessarily these price predictions were only the latest in a long series of price targets
that gold has shredded like confetti recently back in January both Goldman Sachs and UBS were
calling for gold to top out at $3,100 by the end of 2025 they increased these targets to $3,200
just weeks later but gold breezed past this level on April 11th in early March we found Bank
of America analyst Michael Whitmer’s ambitious target of $3,500 to be more persuasive and that
was because despite price already having rallied hard for more than a year the fundamental drivers
of the rally had not subsided in particular rising geopolitical tensions and US policy uncertainty
have only pushed up demand for safe haven assets minus US government bonds whose status as a safe
haven asset is coming under increasing scrutiny at the time of making this video the $3,500 target
is still intact but for how long the fundamental outlook is no less bullish now than it was 2
months ago so to find out why that is let’s take a closer look at what’s sustaining this rally and by
the way if you’re enjoying this video so far then let us know by hitting that like button down below
and you may as well want to subscribe and hit the bell as well to make sure YouTube gives you a bell
as well when we release another one back to the video now if you watched our previous coverage of
the gold rally you’ll know that central banks have been leading the charge central banks have been
net buyers of gold for 16 consecutive years now but they have been accumulating relentlessly since
Russia invaded Ukraine in February of 2022 and as you’ll remember Russia was promptly banished from
the global financial system and had its foreign currency reserves frozen by the US and European
Union and this was a wake-up call to central banks around the world who learned that they could one
day have their assets confiscated for getting on the wrong side of the US and the EU and this
accelerated the slow trend of ddollarization most notably by China whose reliance on US dollar
denominated assets is looking increasingly risky amid the ongoing trade war and spiraling
US national debt china is not alone though geopolitical turmoil and looming national debt
crises that appear to have no solution have brought fiat currency risk into sharp relief for
investors around the world and this has created enormous demand for gold especially from central
banks whose gold purchases have roughly quintupled since 2022 and that’s because gold is perceived
as a store of value invulnerable to the risks associated with fiat currencies in general and
the US dollar in particular it’s a cornerstone of economic sovereignty that existed long before
the dollar and is guaranteed to outlive it with no direct link to national economic authority it’s
also a hedge against geopolitical uncertainty that exists outside of the conventional international
banking system h now where have I heard that before can’t seem to put my finger on it well
anyway the great rotation by central banks into gold has continued well into 2025 albeit at a
slower pace than last year collectively central banks accumulated a net total of 244 tons of gold
in the first quarter of 2025 down 21% from the 310 tons they bought in Q1 of 2024 the biggest buyer
of 2024 and 2025 so far is the National Bank of Poland whose gold reserves have more than doubled
since 2022 and this year surpassed those of the European Central Bank a Poland central bank bought
61 tons of gold in the first four months of 2025 bringing its total holdings to 509.3 tons of gold
now to put things into perspective the National Bank of Poland’s quotota for gold purchases this
year is 90 tons we can only wonder why the bank has chewed through 2/3 of it while gold has been
smashing new all-time highs every few days perhaps they expect the price of gold to continue going
up only for the rest of the year and uh perhaps it will and this looks more like the exception rather
than the rule though because China’s central bank has been a major buyer of gold over the last few
years but its purchases have slowed recently as prices pressed further into the uh banana zone
the People’s Bank of China scooped up 30 tons of gold in the last 6 months but this includes just
15 tons bought in the first four months of 2025 and this has brought its reserves up to 2,294
tons which sounds like a heck of a lot of gold but according to Goldman Sachs this is still well
below a global gold average allocation of 20% by central banks according to the World Gold Council
it was 6.5% at the end of Q1 suggesting that China has quite some catching up to do assuming it’s
of course reporting all its gold holdings which isn’t always guaranteed this Goldman now says
is a demand driver that could push gold up to $4,500 an ounce in what they call a quote extreme
tale scenario the bank said in a revised price prediction in late March quote “If the largest
official buyer China were targeting an allocation of 20% and maintained an average pace of 40
tons per month in line with recent patterns we estimate it would take approximately 3 years to
reach a 20% gold share i’m not sure what recent patterns Goldman Sachs is talking about here
because China bought 44 tons of gold last year and 30 tons in the last 6 months with a slowing
rate of purchases as the price runs deeper into the mid $3,000 range as far as we can tell China
has never habitually bought 40 tons of gold per month but we’ll take their point china’s central
bank is going to provide a continuous if not price inelastic source of buying pressure as it slowly
rebalances away from its dollar heavy balance sheet and approaches a gold allocation closer to
that of the Atlanticist countries the good news for gold bulls is that China is not the only
country that is underweight gold and trying to do something about it a data from the World Gold
Council shows that as of Q2 2024 the average gold allocation of central banks in developed markets
was about 28% whereas it was just 13% in emerging markets and this provides useful context for
understanding the ddollarization trend it’s not so much about shedding the dollar entirely as it
is about a normalization of dollar heavy balance sheets particularly in emerging markets it might
have seemed like a good idea to have most of your eggs in a dollar basket at one time but that
world is receding much to gold’s benefit put differently central banks are just rotating their
assets into gold like they were supposed to anyway this can also explain the conspicuous absence of
the wealthiest economies among the central bank buyers of gold of late for example behind Poland
and China this year was Kazakiststan which added a net 6 tons of gold in Q1 next up was India with
three tons Turkey with four tons Qatar with three tons and Egypt with 1 ton of gold accumulated in
Q1 oh I didn’t see you there well now that I’ve this trend of gold buying is showing no signs of
slowing goldman Sachs recently told investors that the rotation into gold by central banks marks
quote a structural shift in reserve management behavior and added quote we do not expect a
nearterm reversal but you don’t have to take it from Wall Street because central bankers are
saying much the same thing the World Gold Council has been polling a group of 69 central banks since
2021 asking how they expect global central bank gold reserves to change over the following year
this includes 45 central banks in emerging markets and 24 in developed markets the proportion who say
gold reserves are set to increase has grown every year since 2021 when it was 52% right through 2024
when it was 81% as of last year there were zero respondents who said they expect gold reserves
to decrease or answered don’t know but there’s an element of mystery about this accumulation too
as sovereign entities share of global gold demand has increased the market has become more opaque as
central banks disclose their purchases to the IMF but often with a lag uh meanwhile other official
institutions such as sovereign wealth funds tend not to publish their holdings at all as such
the reported figures we’re working with don’t paint a full picture and that could explain
why gold continues surprising to the upside the World Gold Council has noted a very large
and growing disparity between its own official sector demand estimates and the data published
by the IMF according to the World Gold Council the proportion of its demand estimate that was
reflected in IMF data fell from 47% in 2023 to 34% in 2024 and in Q1 of this year the World
Gold Council says that it’s down to just 22% mind you this is only data from one quarter but it
appears as though a large majority of gold being snapped up by central banks and other government
institutions is not being reported publicly there is anecdotal evidence to suggest that an increase
in share of the global gold trade is going dark nikki Shields head of metal strategy at the
Swiss precious metals firm MKS Pump observed that before the Russia Ukraine war futures
positioning and ETF flows explained some 86% of the price action of gold she says this figure
has since dwindled to 13% year to date according to Shields the remainder was a combination of
central bank physical and OTC gold flows which together made the market much more opaque since
2022 it’s likely no coincidence that sovereign gold buying is going increasingly underground
amid a global ditching of US dollar assets and the election of a US president who has publicly
threatened to punish countries entertaining the idea of ddollarization now central bank buying
isn’t the only thing sustaining the gold rally one of the more recent phenomenon driving up the
price of gold is an explosion in investment demand among retail investors and this sector of demand
includes gold ETFs bars and coins and has grown rapidly over the last year even as overall gold
demand stayed relatively flat in the first quarter of 2025 a total global gold demand was up just 1%
yearonear but in the same period global investment demand for gold was up 170% reaching 552 tons and
this is more than double the amount of gold bought by central banks in Q1 and includes 315 tons of
gold bars and coins leading the retail frenzy is East Asia where investors are certainly feeling
the FOMO as such many of them seem to be buying in because rather than despite the fact that
the price of gold has reached dizzying heights already last month crowds of hundreds of people in
Hanoi were seen lining up for hours just outside a jewelry store to get their hands on some
precious gold supply constraints have forced stores to limit purchases to 37.5 g per person per
day and they’re still unable to meet this demand meanwhile South Korea experienced its own gold
boom in Q1 complete with a golden kimchi premium surge in demand collided with local shortages
to push the local price of gold up to 24% above the international spot price in February and in
April Korean exchange data showed that average daily trading volume in the local market was
up 342% yearonear but most significant for the global gold market is of course China which
is generally the world’s top consumer of gold this year local retail investors have been on a
buying rampage that saw China’s share of global gold ETF holdings double from 3% in January to 6%
in April in Q1 gold ETF inflows reached 70 tons or about 7.4 billion more than double China’s
previous quarterly record inflows by the end of April China accounted for more than half
of global gold ETF inflows demand has been so strong in China that at one point last month gold
was trading at over $100 above the global spot price prompting the Shanghai Gold Exchange to warn
investors to quote “manage risk and make rational investment decisions in light of recent gold price
fluctuations last year Beijing introduced import quotas to satisfy rising domestic demand for gold
and it has recently had to increase them to keep up with the appetite from retail investors
and this strategy is notable because it seems to be about much more than just gold it’s also
advancing Beijing’s foreign exchange rate goals as you may have heard Asian currencies have been
rallying against the dollar recently amid a global de-risking from US assets amid Trump’s chaotic
trade war and the Chinese yuan is no exception and this is more bad news for Chinese exporters
for whom tariffs are already a pain in the neck after all a stronger currency means less
competitive exports beijing isn’t taking this sitting down though and it appears to have
spotted an opportunity in the booming demand for gold in China the government recently approved
certain commercial banks to sell yuan for dollars and then use the dollars to buy gold to meet the
newly raised import quotas and this counteracts the upward pressure on the yuan and increases
the demand for the US dollar which has been tumbling recently aside from hitting two birds
with one stone this strategy suggests that China is not in any hurry to dethrone the US dollar
which is something to bear in mind when we talk about ddollarization as usual China is playing the
long game here okay so you get the picture central banks and retail investors are continuing to scoop
up gold at a record pace gold has decoupled from just about every other asset on its current moon
mission and doesn’t seem to be running out of fuel anytime soon from a fundamental perspective
and that’s not really great news though because chaos and uncertainty are gold’s favorite fuel
the optimistic take here though is that at some point one of these central banks or cohorts
of FOMOstricken retail investors will realize that there is a much better alternative that you
don’t need to dig out of the ground only to put back into a subterranean vault at a great cost
and if you happen to be watching this video from a central bank and want to learn why Bitcoin is a
better investment than gold you can check out our latest video on that right over here and if you’re
not subscribed to the channel yet you can do that right over here that’s me for now thank you very
much for watching and I’ll see you guys again soon
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