Gold pushes lower but physical demand is up globally including in the United States

Gold pushed lower in early trading – down $5.50 at $1294.50 – on a strong non-farm payrolls report. Silver is up 4¢ at $16.48.

Traders in the gold market continue to focus on the data and its potential effect on interest rate policy while pushing trade and geopolitical concerns to the background. What they might be ignoring at their peril though is the Trump administration’s potential reaction to the problem of the strong dollar. At some point, the White House will need to address to what degree the strong dollar is undercutting its push to boost U.S. exports, and what form that will take is anyone’s guess.

Weak currencies across the globe are fueling renewed interest in gold coins and bullion as investors move to preserve assets against domestic currency deterioration. Gold prices have risen sharply against a number of major currencies over the past few weeks including the euro, the British pound, the yuan as well as a number of emerging country currencies including the Mexican peso.

In the United States, American Eagle gold coin sales registered a strong rebound in May – up 433% from April, according to a Reuters report. As mentioned here earlier in the week, in the era of algo-driven markets, the things that would make gold demand rise, do not always translate to the things that would make the price rise. In the longer run though, physical demand necessarily gets factored into the pricing equation.

Quote of the Day
“Gold is scarce. It’s independent. It’s not anybody’s obligation. It’s not anybody’s liability. It’s not drawn on anybody. It doesn’t require anybody’s imprimatur to say whether it’s good, bad, or indifferent, or to refuse to pay. It is what it is, and it’s in your hand.” – Simon Mikhailovich, Tocqueville Funds (with thanks to Ron Stoeferle and Mark Valek at Incrementum AG)

Chart of the Day

Chart note: Gold’s performance since 2000 illustrates an investment particularly suited for the times. After 12 straight years of positive returns (2001-2012), we had one sideways year (2014) sandwiched between two years of declines (2013 & 2015). Over the last two years (2016-2017), gold has once again delivered positive returns – a performance many gold market analysts view as a harbinger of things to come. Not a bad track record after all is said and done during times of rapid, and often unexpected changes in the financial markets and the economy.

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