Gold gives back some of yesterday’s gains, ANZ Bank sees $1900 by end of year

(USAGOLD – 6/11/2020) –  Gold is giving back some of yesterday’s strong gains in what appears to be a bout of profit-taking. The yellow metal is down $8 at $1732. Silver is down17¢ at $17.99 – the stronger of the two metals over the past two days. Yesterday’s sharp move to the upside began immediately after the Fed announced it would keep rates near the zero level and continue funding bond purchases. It was helped along by reports of a jump in coronavirus infections in some states coming out of lockdowns.

ANZ, the Australian bank, believes gold will climb to $1900 an ounce by the end of the year. “We remain bullish over the medium term,” says the bank’s senior commodity strategist Daniel Hynes and commodity strategist Soni Kumari in an column. “The macro backdrop is challenging, despite market confidence in the trend towards normalized growth. The expansion of central banks’ balance sheets shows no sign of abating, while geopolitical tensions escalate. We think those investors who continue to raise their allocation to precious metals are sitting on a gold mine.”

Chart of the Day

line chart showing soaring economic uncertainty index from the St. Louis Fed

Chart courtesy of Scott R. Baker and the St. Louis Federal Reserve [FRED]

Chart note:  The St. Louis Fed’s Uncertainty Index, now at all-time highs, is based on newspaper coverage frequency.  “Our US index,” says the authors, spikes near tight presidential elections, Gulf Wars I and II, the 9/11 attacks, the failure of Lehman Brothers, the 2011 debt-ceiling dispute and other major battles over fiscal policy. Using firm-level data, we find that policy uncertainty raises stock price volatility and reduces investment and employment in policy-sensitive sectors like defense, healthcare, and infrastructure construction. At the macro level, policy uncertainty innovations foreshadow declines in investment, output, and employment in the United States …”

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