Gold trades nearly $25 higher overnight, confusion reigns on renewed trade talks (A sense that the old must give way to the new)

(USAGOLD – 8/26/2019) – Gold traded as much as $25 higher than Friday’s close in Asia late yesterday. It then gave back nearly all that gain after President Trump announced China had contacted U.S. trade representatives to restart trade negotiations. China’s Foreign Ministry says it has no knowledge of any communication.  Gold is now up $3 on the day at $1530. Silver is up 22¢ at $17.61.

Much happened at the central bank and G-7 meetings over the weekend.  None of the highly scrutinized particulars, however, is likely to have a greater effect than a general sense that the old must give way to the new. In a Financial Times report this morning, James Bullard, president of the St. Louis Federal Reserves summed up that sentiment. “Something is going on, and that’s causing I think a total rethink of central banking and all our cherished notions about what we think we’re doing,” he said. “We just have to stop thinking that next year things are going to be normal.”  To which FT adds: “Interest rates are not going back up anytime soon, the role of the dollar is under scrutiny – both as a haven asset and as a medium of exchange – and trade uncertainty has become a permanent feature of policymaking.” That about sums it up, and it is a long way from where we were a week ago.

Quote of the Day
“I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold. Additionally, for reasons I will explain in the near future, most investors are underweighted in such assets, meaning that if they just wanted to have a better balanced portfolio to reduce risk, they would have more of this sort of asset. For this reason, I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.” – Ray Dalio, Bridgewater Associates [Paradigm Shifts]

Chart of the Day

Overlay chart showing rising gold and silver since May 2019

Chart note:  It has been a good year thus far for gold and silver.  Gold is up 19%  since the beginning of 2019 and silver 13%.  Silver is still in catch-up mode with its ratio to gold now sitting just under 88 to one. This chart reflects London pricing and does not include Friday’s strong U.S. close near $1527 for gold and $17.40 for silver.

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