DAILY MARKET REPORT
Gold is trading circumspectly this morning in and around the $1275 mark and level with yesterday’s closing number. Silver is also running sideways. A statement from Fed chairman Powell that the central bank will stay the course on raising interest rates, which normally might have undermined the price, is balanced with concerns about the intensifying trade war between the U.S. and China. The commodities complex and U.S. dollar are also level on the day with stocks displaying marginal weakness. In short. . .a quiet day summer day in the markets.
Quote of the Day
“If we don’t quite know what the future holds, there is little point in getting carried away by very fancy mathematical calculations of optimal portfolios. Don’t rely on past data to be a good guide. Try to think through what mix of assets gives you the best chance of surviving some big event. That must mean including assets that are negatively correlated or uncorrelated in your portfolio. . . .And I am very struck by the fact that over many many years, central banks, governments and individuals have always, despite the protestations of economists, held some gold in their portfolio. Obviously, there is no high running return, but when unexpected things happen, particularly when governments rise and fall, then gold is a means of payment that everyone is always prepared to accept. And I think that’s why even central banks have always had a role in their portfolios for gold.” – Mervyn King, former Governor of the Bank of England
Chart of the Day
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 Mervyn King suggests above.