Gold stages something of a recovery this morning – price action itself an important indicator

(USAGOLD – 5/22/2020) – Gold is staging something of a recovery from yesterday’s more than $20 sell-off – up $12 at $1743.50.  Silver is up 6¢ at $17.24.  The list of concerns dominating investor thinking and driving gold demand remains the same as we end the week – inflation, deflation, the success (or lack of success) of aggressive central bank policies, etc. The price of gold has remained firmly in a range above $1700 over the past few weeks despite the ebb and flow of sentiment and resistance encountered consistently at the $1750 level.  To some, though, the price action itself is an important indicator.

“The system was burdened by massive, unsustainable debt,” writes the Equity Management Academy in a recent Seeking Alpha opinion piece. “Fundamentally, there are many things to try to understand and we may never understand it all. The price action of the market is key to trading at such times by telling you what really is happening and what to anticipate. It is clear that the metal markets are saying that all of the stimulus coming into the market is going to be bearish for the dollar and be detrimental to the value of the US dollar as the world’s reserve currency. Therefore, long term, it will be bullish for the metals.” [Emphasis added.]

(Year-to-date, gold is up 11.8%. It is up 3.5% over the past month. Silver playing catch-up is down 4.4% year-to-date and up 14.4% on the month.)

Chart of the Day

Overlay chart showing financial stress index and gold

Chart note:  Gold tracks financial stress – even anticipates it – as shown in the chart above. Gold ownership is a way to make one’s portfolio crisis ready on a permanent basis – a means to batten down the hatches against recurring financial storms and, for the minority who own it, an effective and ever-ready defense.

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