Gold opens at a new high of $3400, can this bull market be ‘even crazier’?

 At the opening of trading on Monday, the international gold price unsurprisingly hit a record high……

Market data shows that spot gold prices have come above the $3,380 line in early Asian trading on Monday, and New York gold futures have touched as high as $3,395, which is close to hitting the $3,400 integer mark.

It can be said that many precious metals investors have been a little “numb” to the gold price that has continued to hit new highs in recent times. From about $2,000 at the beginning of last year to near the $3,400 mark today, almost all market participants have been amazed by the momentum of gold’s rally.

But how would you feel if someone told you right now that this gold bull market might not be climbing at a “historic level” enough?

Macro strategist Simon White turned over the weekend to a 45-year-old experience and compared it with the current situation in the gold market.

Gold’s recent rally pales in comparison to the late ’70s, with the price up more than 60% since the start of 2024, White said. And in the bull market 45 years ago, gold tripled or quadrupled in just one year.

White pointed out that there were multiple factors in the bull market in gold at that time: the United States experienced a decade-long hyperinflation, and the Federal Reserve began to lose market trust. Most crucially, the US ended the convertibility of the dollar with gold in the early 1970s.

On August 15, 1971, Nixon announced the implementation of the “New Economic Policy”, which stopped exchanging $35 per ounce for the US dollars of non-reserve currency countries, which, together with other economic policy adjustments, triggered the collapse of the Bretton Woods system. Investor confidence in paper money has collapsed, and demand for gold as a “hard currency” to fight inflation has surged.

 According to White, these factors are still relevant today:

Inflation in the United States remains stubborn (albeit less than it was at the high level of the late 1970s), and the Fed has not repeated the credibility crisis of the Paul Volcker era, but its independence is being eroded more and more in the future.

Last week, US President Donald Trump lashed out at Fed Chairman Jerome Powell three times in a row on social media, with unprecedented harshness.

White said that this time, while not closing the gold exchange window like Nixon, Trump has essentially changed the convertibility of the dollar as a “stable asset free from political interference.”

For example, over the past three years, global dollar-denominated reserve assets have fallen by $450 billion, while gold reserve assets have increased by more than $700 billion, White said.

White said that while gold’s current rally may not be comparable to that of 1979/80, it is a stark reminder that bubbles can even outpace even the most fanciful expectations of the moment.

This may also be the reason why many Wall Street investment banks have been raising their gold price expectations recently, even looking at $4,000 or even higher……