Gold rallies off lows to finish level on the day


Gold rallied back from its lows on the day to close level on the day at $1323.  Silver also rallied off it lows but still finished the day 4¢ lower at $16.53.  The dollar did pretty much the opposite – rising then falling to finish pretty much level on the day. The Treasury bond auction we mentioned in the EARLY REPORT went better than expected contributing to gold’s rally and the dollar’s demise.  Commodities were down today offering little help to gold.  We’ll see what happens after the consumer price report is made public.

Goldman Sachs today offers the interesting observation that the Bank of Japan has “very limited” options for reigning in yen appreciation. “If the BOJ wants to prevent a further decline [in yen bond yields], it would need to reduce [Japanese Government Bond] purchase amounts, but that could lead to further yen appreciation. Conversely, precisely because of this risk, the BOJ is likely to allow the 10-year rates to remain at a low level for the time being. . .” As we have reported here consistently, the yen and gold seemed to be joined at the hip these days. If the Bank of Japan is going to allow the yen to rise, and that seems likely out of necessity, it bodes well for gold.

Quote of the Day
“For the first time since the global financial crisis, the global economy is growing reasonably strongly, with all major economic regions contributing. Our research shows that continued economic growth underpins gold demand. As incomes rise, demand for gold jewellery and gold- containing technology, such as smartphones and tablets, rises. Income growth also spurs savings, helping increase demand for gold bars and coins. Increased consumer demand also supports the investment case for gold and highlights its dual nature. Investors often focus on gold’s effectiveness as a hedge against financial shocks. But rising wealth underpins gold consumer demand, which, in turn, supports gold prices over the long- run. The interaction between investment and consumption also results in gold’s lower correlation to other mainstream financial assets, making it an effective diversifier.” – World Gold Council, 2017 Annual Review

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