DMR–Gold continues retreat though less aggressively this morning

DAILY MARKET REPORT

Gold continued its retreat, though less aggressively this morning, down another $2.50 at $1290.  Silver is steady at $16.29.  Though yesterday’s downside was abrupt, it pays to keep things in perspective. Bloomberg reports this morning that major league hedge fund investors, Ray Dalio and John Paulson, have stayed “loyal to gold” in this period with both maintaining their holdings.  In fact their loyalty appears to be part of a general trend among funds and institutions.

“SPDR Gold,” reports Bloomberg, “saw net inflows of $396 million in that period, boosting holdings in all bullion-backed ETFs tracked by Bloomberg to the highest since 2013.” We wouldn’t be surprised to learn that professional money managers have added to their positions on price weakness of the past few days.

In short, it is the long-term that really matters, both in terms of what gold can do for us as investors and the inevitable twists and turns financial markets will take along the way.  All of which brings us to quote and chart of the day. . . . . . .

Quote of the Day

“Significant increases in inflation will ultimately increase the price of gold. Investment in gold now is insurance. It’s not for short-term gain, but for long-term protection. I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counter-party signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counter-party. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.” – Alan Greenspan

Chart of the Day

Chart courtesy of MacroTrends.com

Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard, as Mr. Greenspan suggests above.

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