Gold tracks marginally higher this morning after yesterday’s rapid retreat from seven year highs
(USAGOLD – 5/19/2020) – Gold stabilized and tracked marginally higher this morning after its rapid retreat from seven-year highs near the $1770 level yesterday. It is now trading at $1740 – up $4 on the day. Silver is up 14¢ at $17.20. Though down from the strong volumes of a few weeks ago, demand is still running strong among safe-haven investors buying physical metal and professional investors taking long speculative positions in futures markets. Inflation and deflation concerns remain the chief factors driving investment demand at this juncture with some analysts now moving global geopolitical tension – particularly between the United States and China – into the number two position.
The World Gold Council is out with its survey on Central Bank Gold Reserves for 2020 this morning and finds that 20% of central banks “intend to increase their gold reserves over the next 12 months” – a trend it says is notable in that acquisitions are already at record levels. “Furthermore,” it says, “79% of respondents view gold’s performance during times of crisis as an important reason to hold gold…while 74% of respondents consider gold’s lack of default risk to be an important reason for holding the metal.” Both numbers are up from 59% in last year’s survey. The shifting sentiment, it says, “may suggest a re-evaluation of gold’s role amidst ongoing financial and economic uncertainty, while also reflecting long-term concerns about fiscal sustainability as government stimulus is deployed to cushion the global economy.” The report goes on to state that most central bank gold buying occurs in the London OTC market with some sourcing the metal directly from domestic production.
Chart of the Day
Sources: U.S. Department of Labor, St. Louis Federal Reserve [FRED]
USAGOLD note: No comment necessary except perhaps to say that the spike you see to the far right is not a data error and it is unfortunately forecast to go even higher in the weeks and months to come.