Gold up modestly in early trading – holding above the $1400 level
(USAGOLD – 7/12/2019) – Gold is up modestly in early trading following yesterday’s steep sell-off on a worse-than-expected inflation report. Only in this upside-down, Alice-in-Wonderland investment climate can an item generally viewed as an inflation hedge decline on news of a possible return of inflation. But decline it did. This morning the yellow metal is making an attempt at recovery trading tentatively at $1406 – up $2 on the day. Silver is down 1¢ at $15.10. TIAA Bank’s Chris Gaffney remained optimistic after what he described as gold’s “knee jerk reaction” to the inflation report. Yesterday’s move, he told Reuters, was “just an adjustment of the fact that maybe it had gone up a little fast [on Wednesday], but is still holding nicely above $1,400, and it looks like we are going to continue holding above $1,400.” The overriding issue remains monetary policy and perhaps before too long the Fed chairman’s clearly-stated dovish stance will regain the upper hand in gold’s pricing.
Quote of the Day
“An ounce of gold cost $271 in 2001. Ten years later it reached $1,896—an increase of almost 700 percent. On the way, it passed through some of the stormiest periods of recent history, when banks collapsed and currencies shivered. The gold price fed on these calamities. In a way, it came to stand for them: it was the re-discovered idol at a time when other gods were falling in a heap of subprime mortgages and credit default swaps and derivative products too complicated to even understand. Against these, gold shone with the placid certainty of received tradition. Honored through the ages, the standard of wealth, the original money, the safe haven. The value of gold was axiomatic. This view depends on a concept of gold as unchanging and unchanged—nature’s hard asset.” – Matthew Hart, Vanity Fair
Chart note: We ask the indulgence of our regular readers who have seen this chart before. We have had quite a few new visitors over the past few weeks looking into gold for the first time, and this chart more than any other, we feel, is central to understanding why gold continues to make sense as a long-term portfolio holding. 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 downs 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.