Gold surges in surprise overnight move – up $25 and back over $1500

(USAGOLD – 9/12/2019) – A surprise greeted U.S. gold owners to start the day – the yellow metal surging $25 higher overnight and vaulting back over the $1500 mark at $1518.  Silver is up 14¢ at $18.24.  The move comes courtesy of the European Central Bank which lowered rates overnight and relaunched quantitative easing to the tune of €20 billion per month.  European investors responded with a wave of gold and silver buying.  Needless to say, the ECB’s dovish move will pressure the Fed to match it with some easing of its own. Though a Fed version of QE is not in the works at the moment, the ECB decision will cause a good many on Wall Street to think that it paves the way for something similar in the United States down the road. POTUS took note of the ECB’s dovish ways in a tweet while keeping the pressure on the Fed which he complained “sits, sits, sits.”

“At this stage, the gold market believes the US central bank will deliver a neutral cut, ” says TD Securities Bart Melek in an FXStreet article, “with no unqualified commitments to cut rates aggressively. . .Germany is showing weakness due to trade, China is continuing to disappoint and there are signs that the US is also slowing. Given these facts on the ground and the fact that monetary policy is not very productive, the projected declines in gold should be seen as a buying opportunity, as central banks will need to be aggressive in their monetary action to overt a sharp decline in global activity next year.”

Overlay chart showing gold spike up and euro spike down
Chart courtesy of TradingView.com (indexed to 100)

Quote of the Day
“While many of the remaining ‘gold bears’ and those who claim that ‘gold’s rise is basically behind us’, they are mostly the same folks who said the same at $1,200 and who also claimed that gold was going under a $1,000 too. Words like ‘relic’ were common in their description of gold, and many of them even claimed that bitcoin and cryptocurrencies were the ‘new gold’. How’s that working out for them?”Peter Grandich, Peter Grandich and Company

Chart of the Day

HowMuch graphic showing world's top reserve currencies in composite dominated by the dollar and the euro

Chart courtesy of HowMuch.net

Chart note:  “The U.S. Dollar makes up 61% of all central bank foreign reserves,” says How Much, “making it the most popular and powerful currency in the world. The total value of all currencies held in foreign exchange reserves is equal to nearly $11 trillion. The U.S. Dollar also dominates the forex trading market and is involved in about 90% of all forex trading. The Euro and U.S. Dollar make up over 80% of the world’s currency reserves. Despite being a large part of global trade, the Chinese Renminbi makes up less than 2% of global currency reserves.”

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