Company Interview / Shane’s View: The life of an economist

While shares remain strong, the risk of a correction remains high given stretched valuations and numerous potential triggers including; slowing US jobs data; US tariffs; public debt sustainability in the US, France, UK and Japan; the US government shutdown and geopolitical risks, although another Israel / Gaza peace deal is good news.

So, what’s driving the strength in gold and bitcoin? Both made new highs in the last week with gold rising above $US4000 an ounce, before pulling back a bit. 

Both are being driven by similar things: a downtrend in global interest rates; a downtrend in the $US; a desire for a hedge against governments seeking to inflate their way out of high public debt levels (ie debase their currencies); a desire for a hedge against geopolitical threats; in the case of gold central banks allocating more of their reserves to gold; and bitcoin gaining more institutional acceptance. 

But overlaying on both now is an element of momentum driven demand from ordinary investors who have a fear of missing out (FOMO) - a sign of this is the queue outside ABC Bullion in Sydney’s Martin Place. Our assessment is that the fundamental drivers could push both higher, but the increasingly speculative nature of the rally means it could be vulnerable to a short-term pullback. 

To hear more, tune in to Shane’s Simplifying Investing podcast here: Simplifying Investing | Podcast on Spotify.