Recent developments in the price of gold have raised questions about its divergence from the traditional economic fundamentals that have historically influenced it. While real interest rates, the U.S. dollar, and physical demand for gold have typically driven prices, these factors no longer justify the sustained rally in gold. Instead, a macroeconomic hypothesis suggests that the fiscal deficit’s massive creation of fiat money, especially U.S. dollars, has increased the value of alternative physical assets, including gold. This theory offers a more plausible explanation than central bank purchases by nations like Russia and China. In this newsletter, we explore these themes and the broader implications for investors. Gold’s Divergence from Traditional Fundamentals Historically, the price of gold has been closely linked to a few key… Read more
