Gold alert: Deep in the veblen doom loop, but selling out now is a risky bet
|Gold has been on fire, and for once, it’s not just the usual suspects fueling the frenzy. As a long-time holder and trader—I scooped up my first physical RCM ounce at $415 back in 2005—I’ve always had a love-hate relationship with trading gold. I hate the whipsaw volatility, but I live for the peaks, knowing I’ve got physical bars locked away. And right now, we’re deep in the Veblen doom loop—where demand surges as prices rise, defying all market logic and correlation.
But this rally isn’t just about central banks hoarding gold or the classic trade war fear bid. Two major narratives have been setting the gold market ablaze.
First, there’s the wild speculation that Trump might revalue U.S. gold reserves. The U.S. Treasury still prices its gold holdings at a laughable $42 per ounce. If that gets marked up to current spot prices, it magically adds around $800 billion to the balance sheet. That means less Treasury issuance, a potential tailwind for bonds and the dollar. But here’s the kicker—why this would be a bullish catalyst for gold itself is a mystery. If anything, it could cap the rally rather than fuel it.
The second game-changer? China just gave the green light for ten major insurers to allocate 1% of their balance sheets to physical gold—potentially injecting a monstrous $27 billion into the market. This wasn’t exactly a well-kept secret in gold circles, but now, analysts are treating it like a golden bullet. The reality? There’s a Grand Canyon-sized gap between having the ability to buy gold and actually pulling the trigger—especially when it’s trading at all-time highs. Backing up the truck at these levels isn’t exactly a risk-free proposition.
But here’s where things get truly unhinged—physical delivery premiums are holding like a vice grip, which is practically unheard of. Arbitrage gaps this wide don’t typically last, yet the desperation for metal is real. I’ve never seen such relentless New York physical demand in all my years trading gold. As contracts roll over at sky-high premiums or get closed out for physical delivery heading into settlement day, a day of reckoning looms for the gold market.
For now, the usual golden rules apply. Central banks are on a buying spree, Trump’s tariff war is keeping the fear trade alive, and in Asia, gold is doubling as a hedge against a surging dollar.
Bottom line? Gold is no longer just a commodity—it’s behaving like a financial weapon. And while logic says this rally should take a breather, betting against gold when the world is spiralling into chaos? That’s a gamble I wouldn’t take right now.
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