Central banks

The close link between gold and the dollar is well known: when the greenback rises, the yellow metal falls. For several years now, however, the international context has been shaking things up.

Against an already tense liquidity backdrop, a new banking stress story emerged this week. The threat of a credit event is likely to support the gold physical demand in the short term.

China raised its gold reserves for a ninth straight month in July. Bullion held by the People’s Bank of China rose by 740,000 troy ounces, the central bank said on Monday.

The financial system should have been allowed to collapse 15 years ago when the problem was 1/3 of today. But governments and central bankers prefer to postpone the inevitable and thus passing the batten to their successors thereby exacerbating the problem.

The global economy is currently going through a long period of transition. This situation could prove favourable for gold, but unfavourable for equities, which are also suffering from high valuations and have never been so unattractive compared to US government bonds.

Bitcoin is often presented as "digital gold", but the question immediately arises: competition or complementarity? Gold benefits from a centuries-old history and unrivalled trust, while crypto-currencies bring the innovation of blockchain, and it is here that synergies can occur.

In the United States, public finances continue to deteriorate. Faced with a weak currency, Japan's central bank is forced to let rates rise. The price of gold in yen broke an all-time record, amid complete media indifference.

Since the resolution of the recent debt ceiling "crisis", the US national debt has soared by $1.8 trillion. A situation that raises concerns about its long-term sustainability.

The price of gold has rallied in recent days. Not only is the battle against inflation far from won, but the risk of a monetary policy error is also increasing.

Since the introduction of measures enabling banks not to bear bond losses on their balance sheets, the markets have not recorded the slightest correction. We have just witnessed six months of spectacular gains. It's as if the Fed had assured the markets that it would not hesitate to intervene at...