Gold up as Monday’s market dynamic reasserts itself

(USAGOLD – 5/15/2019) – Gold reasserted itself in today’s early going after taking a minor hit yesterday in the ‘day-after’ reaction to Monday’s financial market drama.  It is up $3 at $1300 early in today’s session. Silver continues to lag – up 1¢ at $14.81.  As mentioned in yesterday’s DMR, on Monday we saw the initial reaction to a major change in market atmospherics.  Over the coming days and weeks, “we could see a more sustained reaction as steadier and more determined hands take the rudder. Under the circumstances, safe havens like bonds and gold are likely to receive a fair amount of attention.” Today, we are beginning to see some signs of Monday’s market dynamic reasserting itself. Gold and bonds are both back to the upside and stocks are down sharply.

Sharps Pixley’s Lawrie Williams had a similar take yesterday. “Equities may bounce back,” he wrote, “but such a bounce could be shortlived and if so gold is likely to breach $1,300 yet again and perhaps this time the breach could be permanent.  Resistance is seen at $1,310 but many analysts see $1,350 as the key and if the gold price can get through that level in the northern hemisphere summer it could be poised for $1,400 and above in the second half of the year.”

Quote of the Day
“There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up, perhaps indefinitely. Then there are those, superficially more astute and generally fewer in number, who perceive or believe themselves to perceive the speculative mood of the moment. They are in to ride the upward wave; their particular genius, they are convinced, will allow them to get out before the speculation runs its course. They will get the maximum reward from the increase as it continues; they will be out before the eventual fall. For built into this situation is the eventual and inevitable fall.  Built in also is the circumstance that it cannot come gently or gradually. When it comes, it bears the grim face of disaster. That is because both of the groups of participants in the speculative situation are programmed for sudden efforts at escape.” – John Kenneth Galbraith, A Short History of Financial Euphoria, 1990 (With thanks to John Hussman, Hussman Funds)

Chart of the Day

Charts courtesy of TradingView and BullionRates.com

Chart[s] note: “The countries with the highest country risk,” says analyst Daniel LaCalle of Thinking Heads Agency, “are also those that have abused most of the financing of public spending by the central bank through the printing of currency. Argentina has a higher country risk than apparently more fragile economies due to the constant refusal on the part of the successive governments to adopt a prudent monetary policy and to defend the purchasing power of the currency.” As economies around the globe weaken, the temptations presented by the monetary printing press will become increasingly difficult to resist. In each instance, domestic gold demand is likely to rise as a consequence.  It is usually only a matter of time until the price in that currency follows suit.  The two short-term charts shown above illustrate the process.

 

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