Gold inches higher as virus news worsens

(USAGOLD – 2/13/2020) – Gold inched higher this morning after touching an overnight low at $1566. It is now up $4 from yesterday’s close at $1574.  Silver is up 12¢ at $17.65.  It seems that the Fed chairman’s testimony went off without a hitch as far as the financial markets are concerned. Controversy was avoided.  Expectations remained in place. As for the coronavirus, the news only got worse and that is probably the reason for the minor push higher this morning.

The World Gold Council released a study of gold as a strategic portfolio asset for funds and institutions yesterday. Among several interesting findings, it makes a point about gold being a long-term investment suitable for all seasons:

“Gold is long considered a hedge against inflation and the data confirms this. The average annual return of 10% over the past 49 years, has outpaced the US consumer price index (CPI). Gold also protects investors against extreme inflation. In years when inflation was higher than 3%, gold’s price increased 15% on average. Over the long-term, therefore, gold has not just preserved capital but helped it grow. Notably too, research by Oxford Economics shows that gold should do well in periods of deflation. Such periods are characterised by low interest rates, reduced consumption and investment, and financial stress, all of which tend to foster demand for gold.” [Emphasis added.]

Though the report is geared to professional money managers, its conclusions apply just as readily to the concerns of private, individual investors.

Chart of the Day

Line chart of gold's seasonal trends

Chart courtesy of Gold Charts R Us

Chart note:  We are now six weeks into the part of the seasonal cycle when historically gold regains price momentum. Whether or not that continues over the next few months as it has in the past remains to be seen. With gold up almost 4% thus far in 2020, we can say we are off to a solid start. Too, there is more than enough uncertainty on the global economy’s plate to elevate the possibility of further gains.

Note:  Offered with the usual caveat that past performance is no guarantee of future results.

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