Gold recovers some of the ground lost yesterday afternoon, Minerd raises prospect of U.S. accumulation for reserve purposes
(USAGOLD – 6/12/2020) – Gold recovered some of the ground lost yesterday afternoon as Fed chairman Powell’s less than bracing message from Wednesday sunk in and investors registered concern that a second wave of pandemic might be in its early stages. The metal is up $10 at $1740. Silver is level at $17.74. The top-of-the-list concerns driving investor interest in gold remain the same – inflation, deflation, the success (or lack of success) of aggressive central bank policies, etc. Those who fear policymakers’ efforts will fall short worry about an outcome like the 1930s Great Depression. Those who think the money printing will revive moribund economies worry it will also create runaway inflation. Both camps have turned to gold for safe-haven purposes and, over the past few months, prices have pushed steadily higher as a result. As of this morning, the metal is up 13.75% on the year and 30.4% over the past 12 months.
We came across this interesting bit of speculation from Guggenheim Investments’ Scott Minerd and thought it worth passing along. “There are no signs the world is questioning the value of the U.S. dollar,” he wrote in a recent client advisory, “but it is clear that it has been slowly losing market share as the world’s reserve currency. With the Fed going all-in on financing the government deficit, the U.S. dollar could be at risk to negative speculation of its status as the dominant global reserve currency. Investing in gold may help offset this trend. The accumulation of gold as a reserve asset historically has been seen as a responsible policy response in periods of crisis. This may very well become the policy option of choice in the future.” If the United States does begin to accumulate gold as a reserve asset, it would be of great benefit, in our view, to those who already own it and those who mine it.
Chart of the Day
Sources: Chicago Board of Options Exchange, ICE Benchmark Administration, St. Louis Federal Reserve [FRED]
Chart note; As you can see, gold tracks volatility. This past March the volatility index reached its highest level since the 2008 financial crisis. The circumstances causing that volatility also played out in the gold market with the London price pushing towards the record levels last achieved in 2011. (Not shown on this chart, a sharp increase in the VIX to 42.5 accompanied yesterday’s stock market decline.) This chart – along with several others of interest to precious metals’ owners – is a constantly updating feature at USAGOLD’s Gold Trends and Indicators page.