Gold drops on profit-taking, shows solid strength against top currencies over past 12-months

(USAGOLD – 6/15/2020) – Gold dropped overnight during Asian trading then picked up steam in Europe.  Profit-taking looked to be the main culprit though some weak numbers out of China (retail trade and industrial output) dampened enthusiasm for a quick recovery elsewhere. The yellow metal is down $21 at $1711.  Silver is down 39¢ at $17.19.  Gold has displayed considerable strength over the past several months in almost all major currencies as investors have moved purposefully to buttress portfolios against either a deflationary or inflationary outcome. Along these lines, James Grant tells an interesting story from the early years of the Great Depression in a recent issue of Grant’s Interest Rate Observer – a time some have likened to our own.

“In the final year of the 1929–32 bear market,” he writes, “the investor Bernard M. Baruch was buying gold rather than orphaned stocks and cast-off credit instruments. Long after the fact, Franklin D. Roosevelt’s Treasury secretary, Henry Morgenthau, Jr., asked him why. It was no innocent question, as the government had outlawed private gold holdings in 1933 and pre-1933 ‘hoarders’ were still under a retrospective cloud. ‘[B]ecause I was commencing to have doubts about the currency,’ the investor and elder-statesman-without-portfolio forthrightly replied.'”  As our Chart of the Day amply illustrates, a good many around the world are “commencing to have doubts about the currency.”

Chart of the Day

overlay chart showing gold rising stronglyin various global currencies over the past 12 months

Chart courtesy of TradingView.com
Click to enlarge

Chart note:  Over the past twelve months, gold has risen sharply in six of the world’s top currencies – Indian rupee (+40.49%); Chinese yuan (+32.26%); U.S. dollar (+29.61%); British pound (+28.44%); European euro (+27.9%), and Japanese yen (+27.52%).  The rising tide in those currencies represents concern among the citizenry of each country in further debasement of the national currency and attendant systemic risks.

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