All that shines is Gold!

The recent volatility in gold prices is not out of the ordinary, and the rally might continue after taking a breather on account of profit booking. It has rallied sharply in recent months on the coming together of a number of macro factors.
Although the market has become “overbought,” it is felt that the magnitude of this current rally is not out of the ordinary when compared to any of the gold bull markets since 1970.
It is usually seen that bull markets in gold end when underlying drivers change. In past cycles, those drivers included the Oil crisis (1973-74), Stagflation (1974), Plaza Accord (1985), Quantitative easing (2008), COVID (2020) & Rebound Trade (2025). Gold prices stopped pushing higher only once the underlying drivers changed.
This time around, investors turned bullish on the elevated U.S. fiscal deficit during the Biden administration and carried that call into the Trump presidency on a range of unorthodox macro policies.
The time the driver of the Gold rally is the US fiscal deficit, which is in the vicinity of 33 trillion dollars today. This has increased the supply of U.S. Treasury bonds and has pushed their yields higher. The fiscal deficit has also put pressure on USD as investors’ confidence has moderated & interest rate dynamics have evolved.
With rising bond yields & falling USD, central bankers, the world over, have started to flock to the ultimate safe haven – Gold.
But the elephant in the room is the US Fiscal Deficit. Till the time it is brought down, Gold will remain a great investment opportunity. Also, gold remains overbought but underinvested, with total gold investment still hovering at just 5% relative to equity & fixed income markets.
The world still has a lot of catching up to do, so gold should remain an important asset class in every portfolio.

So Stay Invested. Keep Shining !!