There is a growing divergence between physical gold and the paper market

10.7.22 - Another Lost Decade in U.S. Stocks?

Gold last traded at $1,695 an ounce. Silver at $20.09 an ounce.

News Summary: Precious metal prices retreated Friday on upbeat jobs data and a firmer dollar. U.S. stocks fell as traders evaluated September's jobs report, which showed the unemployment rate continuing to decline and sparked an increase in interest rates.

Wisdom Tree/Kitco--"Although rising bond yields and an extraordinary rally in the U.S. dollar has created significant headwinds for gold, there is no doubt it remains an essential hedge for investors, according to one commodity analyst.

In a recent interview with Kitco News, Nitesh Shah, head of commodity research at WisdomTree, said that although gold has been in a downtrend through most of 2022, the precious metal is holding up relatively well.

This week, the precious metal has seen a short-covering rally pushing prices back above $1,700, cutting the loss to 6% year-to-date.

Shah said that according to his modeling, given how far bond yields have risen this year and the U.S. dollar's rally to a 20-year high, gold prices should be down 21% this year.

'I know some people have been disappointed with gold, asking why prices aren't higher given where inflation is but against this setup, gold is doing pretty well,' he said. 'If you are a nondollar gold investor, then gold prices are near record highs.'

Shah said that he suspects the growing divergence between the physical market and the paper market is the reason why gold has performed well in the current environment."