Gold Rising on Widening U.S. Account Deficit and Over-Valued Stock Market
Gold prices are steady, printing higher. Amid this are flashing signals that the economy is not healthy. Economic conditions might deteriorate even with record stimulus and trader optimism. The greenback's weakness is bullish for gold that's gaining even with rising bond yields. From January 2021, the 'Biden Effects' marked with record stimulus translates to widening deficit, chances that may pump the stock market that's at outrageous valuations.
Gold will benefit as long as theglobal economy is uncertain. The continuous debasement of fiat and increasing debt combine negatively for the greenback but boost safe-havens. Worse, the FED and the Treasury Secretary Janet Yellen agree that the economy needs support, a decision that, surprisingly, isn't catalyzing inflation or salvaging the weak labor markets. An overvalued stock market in a record-low interest rates environment, Americans flush with stimulus checks, and better administration of the coronavirus vaccine may temporarily lift indices. However, this places stocks at a precarious position whose inevitability is a painful crash, buoying gold, as the market corrects to sensible valuations.
Impact on gold:
Bullish. The market is still in flux with conflicting signals for and against gold. Inflation is low even with the economy primed with free checks and bond purchases. If it does happen, the resulting slide will pump gold to new valuations.
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