The current price of gold $PAXG has broken through $3,390, and many believe this is just the beginning of a gold bull market. If a so-called 'gold rush' occurs in the future, gold prices could even soar to over $10,000 per ounce.
What is a gold rush?
This is a professional term originating from the futures market, essentially referring to the market crisis caused by bears' inability to fulfill their delivery obligations. In the gold market, if bears are forced to close their positions (commonly known as 'being squeezed out'), they must deliver physical gold. However, in reality, many bears do not actually have enough physical gold available for delivery, leading to the risk of a rush. In contrast, if bulls choose to deliver, they can complete the transaction simply by providing cash.
The significance of soaring physical delivery volumes
Currently, the gold inventory on COMEX is rapidly declining, while the volume of physical deliveries is significantly increasing, indicating that more bulls are choosing to demand physical gold rather than just settle for paper profits. If this phenomenon continues to intensify, it will put immense pressure on the bears. Once the bears cannot deliver gold, it will trigger a gold rush.
The uniqueness of gold
Gold is not only a financial commodity but also a hard currency with asset storage functionality. Once a rush occurs, the market will decouple from its original pricing mechanism and enter an extreme state of 'having a market but no price'. This means that gold prices could potentially soar without limits, leading to a global financial storm.
Potential for capital inflow into the gold market
Currently, less than 1% of the hundreds of trillions of dollars in global financial assets is allocated to gold and related ETFs. If more and more funds flow into the gold market in the future, especially with an increasing number of institutional and individual participants opting for physical delivery, it will bring unprecedented impact to the physical gold market.
Summary
The gold bull market has just begun, and the real climax may be the full-blown gold rush. At that time, gold prices will completely detach from traditional valuation logic and reach a whole new height. Preparing in advance and investing in gold may be the most strategic choice in the face of future financial uncertainties.
