Gold pushes quietly higher to close out the week

(USAGOLD – 1-31-2020) – Gold pushed quietly higher this morning tacking another $7 on the price to trade at $1582.  Silver is up 5¢ on the day at $17.92. The spreading coronavirus and the Fed’s dovish tilt from Wednesday still dominate financial markets’ attention.  On the week, the yellow metal is up about $10 while silver is down about 25¢. The best we can say about the week just passed is that precious metals emerged relatively unscathed when things could have gone either way. In the end, we agree with the forming consensus that though the virus rightly has markets on edge, the Fed’s positioning on future stimulus may prove to be the week’s more enduring event. Financial Times’ Gillian Tett passes along a quote from a hedge fund luminary in her column this morning that summarizes Wall Street’s mood: “The music is playing so everyone is dancing, but the risks are piling up.”  So they are . . . . .

Here are a couple of quick notes to close out the week –

First, while few are watching, the yield differential between the 10-year and 3-month Treasury yield has again pinched to zero – a condition in the past that has been a reliable indicator of an impending recession. Please see our Chart of the Day immediately below. The gray bars indicate recessions.

Second, GFMS is out with its annual assessment of gold market fundamentals and price outlook. “While demand from key Asian markets will likely to remain weak this year,” it advises, “ongoing central bank purchases and renewed investor interest will lend support for higher gold prices. We therefore expect gold to average $1,558/oz in 2020, with a possibility to test and move beyond $1,700/oz later in the year.” (See GFMS Research/Review and Outlook/January 2020)

Chart of the Day

Line chart showing the 10 year minus 3-month Treasuries slopeSource:  St. Louis Federal Reserve [FRED]

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