Gold attempts to gain traction ahead of what could be a big week for markets
(USAGOLD – 12/9/2019) – Gold is attempting to gain some traction in this morning’s trading after Friday’s drop to just below the $1460 level. It is up $5 on the day at $1465. Silver is up 9¢ at $16.64. Gold has been stuck in a range between $1455 and $1475 since early November with the four primary factors that drove it higher in the past now seemingly in abeyance – the US-China trade war, the threat of recession, plummeting yields, and stock market instability. All of that could change in a heartbeat, but for now those threats have gone to the back burner and gold has gone on hold.
Analyst Clif Droke, though, brings an old market nemesis forward as the year comes to a close – and one that he thinks could propel gold in 2020. In a Seeking Alpha article, he says “Safe-haven demand will also likely serve to bolster gold’s long-term bull market going forward, but the primary catalyst for gold demand will likely revolve factors other than just global trade. A weakening dollar will only serve to increase the demand for gold as an inflation hedge, which is what typically drives the metal’s strongest rallies. Therefore, investors should expect that as the U.S. currency is pushed downward through policy intervention in 2020, gold’s bullish prospects will increase.”
The coming week could be an important one for markets with the Fed and ECB both holding meetings, the British election on Thursday and the all-important decision on more stringent tariffs due on Sunday. Sandwiched in between are a number of government reports including consumer prices, producer prices and jobless claims. Any one of these is capable of delivering a surprise with the tariff issue, needless to say, the most tenuous at the moment.
Chart of the Day
Chart courtesy of the World Gold Council
Chart note: Central bank gold purchases are running at the highest level since 1971, the year the United States suspended dollar convertibility into gold at fixed rates. Up until 2011, central banks were net sellers from their reserves. Since then, they have become net buyers as shown in the chart with 2019 the strongest year for net purchases on record.