Gold Rally Hinges on Tanker Traffic and Central Bank Moves

The Strait of Hormuz, a key waterway in the Middle East, has seen a significant reduction in tanker traffic due to tensions between Iran and its neighbors. This has led to an increase in oil prices, pushing up inflation and interest rate expectations.

This has put pressure on gold prices, which have been stuck near $4,000 an ounce since the strikes on Iran began in late February. According to John Paulson, a legendary hedge fund manager, people are losing faith in paper currencies and turning to gold as an alternative. He believes that we're still in the early innings of a long-term gold rally.

Newmont, one of the largest gold miners, has reported record free cash flow in the second quarter, generating $2.2 billion after producing some 1.3 million ounces. The company also announced a $0.26-per-share dividend. Other gold mining companies such as Barrick and Agnico Eagle are expected to post combined second-quarter profits of around $3.5 billion.

China's central bank has been buying gold, accumulating 20 consecutive months of purchases. Analysts at New York-based hedge fund Zweig-DiMenna calculate roughly $5.7 billion of Chinese purchases in the first half of this year, most of it in the second quarter.