Gold, silver unchanged, await incentive to move in one direction or the other

(USAGOLD – 1/15/2020) – Gold and silver begin the day essentially unchanged at $1550 and $17.85 respectively with both awaiting an incentive to move in one direction or the other.  At the moment, trade seems to be the dominant issue with an agreement between the United States and China scheduled to be signed in the White House sometime today. The South China Morning Post in an article co-authored with Politico – the US-based news service – says that the agreement’s scale is large. By the end of the article, though, it becomes very apparent that everything depends upon China delivering on the hefty numbers.  In short, even with an agreement signed, much remains up in the air with the threat of a return to high tariffs hanging ominously over today’s proceedings. The market reaction might turn cautious as the realities sink in.

The World Gold Council is out with a report this morning on gold’s prospects for 2020. “Gold,” it says, “has historically performed well in the 12 to 24 month period following policy shifts from tightening to ‘on-hold’ or ‘easing’ – the environment in which we currently find ourselves. And, historically, when real rates have been negative, gold’s average monthly returns have been twice as high as the long-term average. Even slightly positive real interest rates may not push gold prices down. Effectively, our analysis shows that it has only been in periods with significantly higher real interest rates – an unlikely outcome given the current market conditions – that gold returns have been negative.”  With that positive outlook in mind, we refer you to our Chart of the Day immediately below and the accompanying note.

Chart of the Day

Bar chart showing gold's annual returns since 2000 including year end 2019

Chart note:  Gold has produced positive returns in 16 of the last 19 years.  Its average annual return compounded since 2001 is 9.38%.  In 2019, it rose 18.3% – its best annual gain since 2010. A $100,000 investment in gold in January 2001 would be worth over $350,000 today. At gold’s peak in 2011, it would have been worth about $475,000. Over the past two decades, gold has been a portfolio stalwart.

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