They’re Lying: The Conventional Gold Thesis is Dead

Andy Schectman argues the conventional “higher rates are bad for gold” thesis is broken, saying war-driven dollar strength and Fed delay risk are now being overwhelmed by central-bank demand and distrust of fiat reserves. He points to China reportedly cutting Treasury holdings from about $1.3tn to $650bn, alongside 17 straight months of gold buying, as evidence that reserve managers are reallocating into bullion. He also cites continued official-sector accumulation of more than 1,000 tonnes last year and ongoing repatriation efforts by Germany, France and India as proof that nations are reducing reliance on the dollar system and prefer gold and silver they can physically control. On his reading, the traditional war trade—dollar up, gold down—is being distorted by “management of perception” rather than underlying fundamentals. For the desk, the key message is that Schectman sees current gold weakness as artificial and expects the structural bid from central banks and sovereign reserve diversification to dominate. Near-term risk remains that war-related dollar funding stress can still pressure metals tactically, but his view is that the bigger driver is official-sector accumulation and waning trust in U.S. Treasuries, which should remain supportive for bullion over the medium term.