Gold Price Up, Up And Away But Even Chris Wood Is Struggling To Find A Justification

Global spot prices of gold have soared over 15% since the beginning of 2024, driven by robust U.S. inflation data and speculation surrounding potential rate cuts by the US Federal Reserve. Despite this, Christopher Wood, the global head of equity strategy at Jefferies, has expressed surprise at the lack of documented reasons for this significant rise.

Gold prices typically increase during periods of inflation, as investors seek a hedge against declining purchasing power of fiat currencies. Despite cooling inflation and anticipated rate cuts by the Federal Reserve, gold prices continue their upward trajectory unabated.

Christopher Wood attributes this surge primarily to strong demand from China, despite the apparent absence of substantial retail investor interest in the precious metal.

"The recent rally in gold prices can be largely attributed to robust demand from China," Wood explains. However, he notes a lack of solid data to definitively prove this theory.

When Do We See Surge In Gold Price

Gold is traditionally viewed as a safe haven asset during times of economic uncertainty and inflationary pressure. When inflation rises, central banks may respond by raising interest rates to stabilise prices, which can reduce the attractiveness of holding non-interest-bearing assets like gold. Nevertheless, in the current scenario, gold prices are defying conventional expectations.

"Greed & Fear has no idea who or what was behind such a trade, save to note that a soaring gold price is not in the interest of the relevant authorities any more than a surging oil price is. Gold is up by 29% since early October and by 18% since mid-February, while the Brent crude oil price is up by 25% since mid-December," Wood stated.

Why Is Chris Wood Surprised 

• Investment in gold exchange-traded funds (ETFs) in Western countries has decreased by 120 tonnes this year, bringing total holdings down to 2,542 tonnes.

• Reports indicate that physical premiums on gold bars and coins traded in Singapore are currently at normal levels, contrary to expectations during a gold price surge.

• Sales of American Eagle Bullion coins, a popular series in the US, have declined rather than surged during this period.

• While gold mining stocks have experienced a rally, they are not significantly outperforming bullion, as might be expected in a robust bull market.