Gold reverses course after Fed tilts dovish
(USAGOLD – 1/30/2020) – Gold reversed course yesterday afternoon after Fed Chairman Powell indicated that the central bank would meet disinflationary pressures in the U.S. economy head-on. In a strongly-worded statement, Powell said: “We have seen this dynamic play out in other economies around the world, and we are determined to avoid it here in the U.S.” Gold responded to the dovish tilt with a quick move to the upside trading as high as $1585 per ounce – a $16 reversal from yesterday’s lows. In today’s early going, it has tracked back a bit to $1579 but still up about $2 on the day. Silver’s reaction has been a bit more vigorous – up 25¢ at $17.80.
The Fed’s freshly stated determination to get inflation off the dime feeds nicely into a report released yesterday by Atlantic House Fund Management’s Charlie Morris in which he focuses on the future value of the US dollar. “It seems a tad simplistic,” he says, “but gold bull markets have tended to coincide with dollar bear markets, and one is long overdue. Recall that a strong dollar is not the norm, and it slumped by a third between the 2000 stockmarket bubble and the credit crisis. Dollar strength only came about thereafter, as the US had higher real interest rates than elsewhere. It is all about real rates, which have been falling for two decades, and have boosted asset prices in the process.”
Chart of the Day
Map courtesy of Visual Capitalist
Chart note: This map shows the difference between Mercator’s representation of country sizes and reality. “Mercator’s map,” says Visual Capitalist, “inadvertently also pumps up the sizes of Europe and North America. Visually speaking, Canada and Russia appear to take up approximately 25% of the Earth’s surface, when in reality they occupy a mere 5%.