Financial Blog February 21, 2025 164

DeepSeek or Strengthening Gold Against the Dollar?

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The emergence of DeepSeek has brought forth a fresh wave of intrigue surrounding China's technological prowess, inviting both domestic and international investors to reinterpret the landscape of global technologyFurthermore, the rippling effects of DeepSeek on American tech stocks have triggered intensified discussions about the long-term dynamics of gold—specifically its movement away from a dollar-centric valuationThis confluence of events suggests a paradigm shift that warrants close scrutiny.

Recent market reports indicate that participants are racing to transport spot gold from London to New York's COMEX division, spurred by concerns over potential tariffs that U.SPresident may impose on imported goldThe anticipation of such tariffs has led to a significant surge in international gold pricesOn February 3rd, the London spot gold price reached an all-time high of $2,830.49 per ounce, while the COMEX futures saw prices spike to unprecedented levels of $2,872 per ounce.

The chatter around potential U.S. tariffs on gold imports has created ripples in the market.

As of February 4th, during Asian trading sessions, London spot prices hovered around $2,810 per ounce, a figure that reflects a bit of a decline but still follows the record-high points seen the day beforeConcurrently, COMEX futures prices were quoted near $2,840 per ounce, a slight correction from their peak of $2,872 per ounce.

According to research from Everbright Futures, several fundamental factors have been driving the uptick in gold prices: firstly, market sentiment pointed towards a sustained trend of increasing monetary easing from the Federal Reserve

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Secondly, uncertainties around the U.S. tariff policies projected an unpredictable global economy, creating a fertile ground for investor anxiety and risk-averse behaviorsLastly, the U.SPresident’s previous commitments to swift conflict resolution have dramatically faltered, with geopolitical tensions seeming to intensify rather than resolve, diverging significantly from earlier market expectationsCollectively, these elements reinforce the case for gold as a safe-haven asset.

Noteworthy is the escalation in activity concerning gold imports by the U.S. futures marketDue to fears surrounding the President's tariff intentions, there has been a marked increase in daily spot deliveries of gold on COMEX as January drew to a closeSimultaneously, gold leasing rates in London have surged to their highest levels since 2008, indicating heightened demand.

Market insiders indicate that the frenzy around the President's potential tariff on gold imports has led to a considerable increase in demand within the London spot market, so much so that it's prompted transactions of borrowed gold from the Bank of EnglandThis demand surge has, consequently, triggered impressive highs for both COMEX gold futures and London spot gold prices.

The implications of DeepSeek further amplify gold's trajectory away from a dollar-centric valuation.

In light of the heated discussions surrounding DeepSeek, Lu Zhe, Chief Economist at Dongwu Securities, posits that the impact on American tech stocks fortifies a mid- to long-term narrative against dollar dominance supporting gold.

Lu highlights that the disturbances created by DeepSeek may alter the foundational valuations of heavily concentrated U.S. tech stocks

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