Gold trading nervously on trade talks deadlock, jobs report miss


Gold is trading nervously this morning unable to make heads or tails from the combination of deadlocked trade talks between the U.S. and China and an employment report that fell short of expectations.  At the moment, it is trading at $1308 level after hitting $1314 just after the jobs report release and down $4 on the day. Silver is down 4¢ on the day at $16.46.

Of the two developments, the China talks breakdown is by far the bigger of the two issues and one global markets will attempt to sort out over the next several days. Based on the warnings coming from both sides, we would suspect that more tariffs and retaliations are likely with the possibility of a response coming from the White House as early as today.

Jameel Ahmad, the head of currency strategy at FXTM, offered some interesting comments on the current gold market in an article at Scrap Hedge this morning. “The ability of gold to defend the psychological support level of $1,300,” he said, “will encourage investors to consider adding gold to their portfolio around its current levels.” He then added that “if the trade talks between the United States and China do hit a wall, as many anticipate, during the early phases, it would provide encouragement for investors to search for gold as a safe-haven asset. The Japanese yen would also likely benefit if the trade talks between the U.S. and China did lead to a period of renewed uncertainty in the market.”

Quote of the Day
“If I were trying to create a deflationary bust, I would do exactly what the world’s central bankers have been doing the past six years.  I shudder to think of the malinvestment that has occurred.  Corporate debt has soared but most was used for financial engineering.  Bankruptcies have been minimal, but who know has many corprorate zombies free money is keeping alive?  Individuals have plowed ever-increasing sums into assets at every-increasing prices.  Of all the interventions by the not-so-invisible hand of government, not allowing the market to set the hurdle rate for investment is the one I see with the highest costs.” – Stanley Druckenmiller, Duquesne Family Office (Wall Street Journal opinion column)

Chart of the Day

Chart note:  This chart illustrates the solid real rate of return gold has delivered against goods and services in twelve of the past sixteen years. In seven of those years, gold’s appreciation significantly outstripped the inflation rate. With gold currently trading at cyclical lows, you can now combine hedging the worst-case scenario with the extra advantage of securing an asset that is generally viewed as undervalued.  This chart stands in stark contrast to the one we posted yesterday on the real rate of return on dollar-based savings, and reinforces gold’s role as an alternative savings vehicle for the times.

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