US-China Conflict Fuels Gold Surge Amid Cheaper Oil

The recent gold and Bitcoin price surge is closely tied to the US-China conflict in the global financial system. The Iran kerfuffle has been hurting the US on inflation, and oil prices have plummeted as a result. The West Texas Intermediate (WTI) price, which is the US oil price benchmark, has dropped 6% over three sessions, currently trading below $81 a barrel.

This cheaper oil is giving the US Federal Reserve more room to maneuver in terms of interest rates. With lower energy prices flowing through headline inflation faster than almost anything else, the Fed has been given cover it didn't have in July. The US Treasury Secretary Scott Bessent has announced plans to at least double the government's buybacks of longer-dated bonds, which could fund those purchases out of the Treasury General Account.

China is playing a crucial role in this global financial game. The People's Bank of China added 19.9 tonnes of gold in July, its biggest monthly purchase since October 2023. Chinese households are also buying more gold, with bar and coin demand jumping over 28% in the first half of the year.

The Iran conflict was a US play to squeeze China's economy through the energy market. When China gets squeezed, they buy gold as a financial asset. The mainland gold ETF flows and monthly PBOC reserve disclosures for gold matter more than short-term fluctuations in the USD priced gold.