Gold drains geopolitical premium, builds longer-term support on fundamental concerns

(USAGOLD – 1/13/2020) – Gold continued to drain the recent safe-haven premium from its pricing in overnight markets and early in New York. It is down $7 on the day at $1555.  Silver is down 8¢ at $18.04.  At this juncture, gold seems to be consolidating in and around the $1545-1555 range and silver around $18. Whether or not those levels will hold remains an open question.

Those disappointed in gold’s correction from the geopolitically inspired drive over the $1600 mark should not lose sight of the more fundamental concerns that have lifted prices since last May (at the $1275 level) – most notably the eroding real rate of return in dollar-based investments and the abundant, ongoing central bank stimulus at work in top global economies. Jeff Currie, Global Head of Commodities Research at Goldman Sachs reminded CNBC viewers on Friday that “Gold is a hedge against debasement and what we saw in 2011 was debasement, printing too many dollars and the real rate goes down, down, down, which then pushes up the price of gold. If you do see [substantial dollar weakness], the potential to push gold back up into that $1,800-$1,900 range becomes pretty realistic.”

Chart of the Day

Bar cjhart show gold's annual average price since 1970

Chart note: This long-term chart on the annual average price of gold since 1970 dispels the notion that gold is somehow volatile or unpredictable and as a result unreliable as a long-term portfolio safe haven. To the contrary, it shows gold living up to its reputation as a reliable portfolio safe haven during times of rapidly changing economic circumstances.  The strong showing for 2019 is worth noting.

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