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Wood wrote that while the drivers of the oil price rally are fairly obvious, “the near-term drivers of the current gold rally are much less clear.” Wood said it’s impressive that gold continues to set new record highs without ETF inflows in the West. “While this latter point clearly highlights that there is a risk to the current rally, probably the biggest risk remains official attempts to manage the price down,” he said.
“These growing pressures, and the policy responses they may trigger, are as good a reason to own some gold as any,” Wood said. “In the case of the fiscal situation, the ultimate temptation in Washington could well be to try and fix longer dated bond yields in some US version of yield curve control which would surely be as gold bullish as it would be dollar bearish. This is why official efforts to manage the price of gold in the above context risk backfiring.