China's Gold Move Exposes Hidden Macro Themes in Small-Caps
Australia's microcap sector is abuzz with Lachlann 'Lachy' Tierney, a seasoned investigator and writer for Fat Tail Microcaps. In his latest article, he explores the mysterious forces driving gold prices, which may hold clues to uncovering hidden opportunities in small-cap companies.
Lachy draws attention to Michael Howell's recent piece on China's influence over the global gold market. According to Howell, China is now the marginal pricer of gold, ahead of America, and this shift has significant implications for investors. Official central bank buying and the People's Bank of China expanding its balance sheet to combat debt deflation are key factors in this trend.
The PBoC's expansion of its balance sheet is a critical development that few commentators have noted. By controlling the money supply, China can manipulate the gold price, which has been steadily declining since January's peak near $5,600 an ounce. Lachy believes that if Howell is correct, investors should focus on companies with strong fundamentals and macro themes that are not yet in the headlines.
Lachy emphasizes that spotting these trends requires a deep understanding of the underlying forces driving market movements. He notes that gold's slump this year aligns with China quietly turning off the money tap from March to June, a period marked by Iran tensions and a US-China MOU. The tap is reportedly back on now.