‘Gold is worth around $5k’ as the yellow metal ‘has gone from a pure play on real rates to a pure play on liquidity’ – Fidelity’s Timmer
Gold’s fair value has already reached $5,000 per ounce as the yellow metal has transitioned from a rate-based to a liquidity-based trade, according to Jurrien Timmer, Director of Global Macro at Fidelity Investments.
“[Gold] gained ground last week as the global liquidity profile has started to recover,” Timmer wrote in a LinkedIn analysis on Monday. “Based on my Gold & Liquidity regression between global M2 and gold, gold is worth around $5k.”
Timmer shared a chart which he said “illustrates how gold has gone from a pure play on real rates to a pure play on liquidity,” with his model showing gold already worth $5,000 per ounce.
He shared another chart showing the shift from a real rates-driven regime to a liquidity-driven one in 2022.
Earlier in September, Timmer spelled out his reasoning for this liquidity-based valuation of gold.
“It’s telling that the Treasury’s actions last week to buy back more long-dated paper and issue more Bills took down the dollar and caused both gold and Bitcoin to soar,” he wrote. “The market senses a slippery slope towards fiscal dominance and a possible loss in Fed independence. The assumption here is that for the Treasury to be successful in keeping yields down, it will need to significantly increase the size of the buybacks. That might require the Fed to become complicit in this operation twist, which takes us down the debasement path.”
“Loose fiscal policy combined with loose monetary policy is a clear negative for the dollar (which is sitting on a long term trendline), and a clear positive for gold (and by extension Bitcoin).”
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