Can gold rebound to $5,000?
Huitong Network August 27—Against the backdrop of the “currency devaluation trade,” gold is surging to historical highs: a weakening dollar, inflation above the Federal Reserve's target, and record inflows into gold ETFs are collectively pushing gold prices toward the $5,000 mark.
Against the backdrop of the “currency devaluation trade,” gold is surging to historical highs: a weakening dollar, inflation above the Federal Reserve's target, and record inflows into gold ETFs are collectively pushing gold prices toward the $5,000 mark.
Gold prices are benefiting from dollar weakness, even though U.S. Treasury yields are rising at the same time. Gold ETFs are attracting billions of dollars in capital inflows.
It is worth noting that the combination of a “weak dollar + rising U.S. Treasury yields” is historically rare—usually, rising Treasury yields suppress gold prices because the opportunity cost of holding non-interest-bearing gold increases. The fact that gold prices are ignoring this negative factor suggests that risk aversion and the “currency devaluation” narrative have taken center stage in market pricing, with the traditional negative correlation between yields and gold now malfunctioning on a cyclical basis.
The dollar has recovered nearly half of its losses incurred after the U.S. Treasury announced plans to intervene in the bond market to control yields. Investors remain skeptical about the scale and effectiveness of these measures, which is paradoxically restoring some confidence in the dollar. Inflation data provides further support. In July, the Personal Consumption Expenditures Price Index (PCE) rose 3.7% year-over-year, with core PCE at 3.3%. Both measures have remained significantly above the Federal Reserve’s 2% target for a prolonged period. Following these releases, the derivatives market has priced in about a 40% probability of a Fed rate hike in September.
This means that if a rate hike does occur in September, it would represent another unexpected turn in the current tightening cycle—where the market had generally anticipated the end of tightening, the PCE data has undoubtedly disrupted this narrative and heightened gold's sensitivity to policy paths.
The White House’s renewed pressure on the Federal Reserve—the government again attempting to remove Lisa Cook from her FOMC seat, phone conversations between Trump and Waller, and the Treasury’s recent willingness to use non-market-oriented means to push down Treasury yields—are eroding confidence in the dollar and triggering the so-called “currency devaluation trade.” Under this trade, investors move away from currencies and bonds and turn to assets such as precious metals.
In other words, the market’s concern is no longer merely inflation, but the erosion of policy independence and the risk of “fiscal dominance”: when the government attempts to intervene in central bank decisions and bond pricing through administrative means, the credibility of fiat currency's real purchasing power is weakened, thus reinforcing gold’s value proposition as the “ultimate safe haven asset.”
In the past five trading days, gold and digital asset ETFs have attracted a combined total of about $7 billion in capital, which comes as no surprise. Of this, $3.4 billion (almost half) flowed into the SPDR Gold Shares ETF managed by State Street Global Advisors. Precious metals are performing strongly by capitalizing on the dollar’s inability to benefit from high Treasury yields.
It is noteworthy that capital is heavily concentrated in the SPDR Gold Shares, a traditional flagship product, indicating that participants include not only speculators such as hedge funds but also larger institutions with a greater focus on liquidity—this behavior of “buying physical, buying large-cap gold ETFs” is typically seen as a sign of a sustained rally rather than a short-term speculation.
4. Institutional Views: Natixis Raises Target Price
According to Natixis, gold’s upswing is not driven by a single event, but rather the combination of “weaker economic data + shifting policy expectations.” If subsequent employment and inflation data continue to weaken and markets fully abandon expectations of further rate hikes, gold’s upward momentum could strengthen further; conversely, if inflation remains stubborn and forces up rate hike probabilities, this target will be at risk of a pullback.
The Jackson Hole symposium is regarded as a crucial moment for global central bank policy communication, and Waller’s statements could directly reshape market expectations for the Fed’s policy trajectory. The implication from TD Securities is that the current price rally is priced in with a significant “policy intervention expectation” premium; should the speech deliver a hawkish signal or policy intervention expectations fall flat, gold prices may quickly give back their gains. Chasing prices at a peak amid elevated sentiment is, statistically, not an ideal strategy.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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