Gold level on the day in quiet trading

(USAGOLD – 10/17/2019) – Gold is level on the day in quiet trading at $1490. Silver is faring slightly better – up 14¢ at $17.54.  With little in the way of news this morning beyond the latest Brexit machinations (and accompanying uncertainties), the gold market seems content to remain in its present range. Brexit aside, the gold market seems to be responding most directly at this point in time to the ebb and flow of trade negotiations between the United States and China now temporarily on hold. Secondarily, though, the market has in the back of its mind the problems associated with the supply-demand mismatch in the repo market. That market’s elevated needs over the past two days point to a problem that might have deeper roots than originally believed.

Quote of the Day
“Again, the primary driver of gold isn’t the direction of the dollar but the direction of real interest rates. . . The year-over-year change in core CPI increased 2.4% in August, which was the highest level in a year. All the while the US 10-year Note yield was crashing from nearly 3% to 1.6% over the past 12 months. Therefore, real yields have been crashing as gold has been rising.” – Michael Pento, Pento Portfolio Strategies

Chart of the Day

Bar chart showing predominantly positive real rates of return on gold – gold change vs CPI change
Chart note: Since the turn of the new century, gold consistently provided a real rate of return on investment when measured against inflation. In fact, it provided a real rate of return in twelve of the nineteen years represented on the chart. The period was one of subdued inflation. Gold’s performance, as a result, took many analysts and professional money managers by surprise and altered the perception among money managers that the precious metal is solely an inflation hedge.

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