Gold pushes higher in Asia overnight, Goldman upgrades forecast to $2000 per ounce from $1800

(USAGOLD – 6/19/2020) – Gold pushed higher during Asian trading hours in what appears to be a response to trade talks breaking down once again between the United States and China. It then picked up some momentum on the open in the United States and is now trading at $1737 – up $13 on the day.  Silver is up 33¢ at $17.74.  Goldman Sachs yesterday raised its 12-month price forecast to $2000 from $1800 previously, according to a Reuters report, saying it expected gold’s rally to continue “due to currency debasement fears and economic uncertainty caused by the coronavirus crisis.”

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 we close out a subdued week for precious metals, gold is up 27.5% over the past 12 months and silver is up 16.2%.

Chart of the Day

chart showing the St. Louis Fed's Weekly Economic Index 6-6-2020

Sources:  Daniel J. Lewis, St. Louis Federal Reserve [FRED]

Chart note 1:  As you can see, the drop since early March in the Weekly Economic Index is worse than the one during the 2008 financial crisis.  The Index was developed by Daniel Lewis, economist at the Federal Reserve Bank of New York, Karel Mertens, senior economic policy advisor at the Federal Reserve Bank of Dallas, and James Stock, Harold Hitchings Burbank Professor of Political Economy, Faculty of Arts and Sciences of Harvard University, so it is highly credentialed.  If its current readings go unchanged through the end of the quarter, it would portend a roughly 11% drop in GDP from 2019.

Chart note 2:  “The WEI,” says the St. Louis Fed, “is an index of real economic activity using timely and relevant high-frequency data. It represents the common component of ten different daily and weekly series covering consumer behavior, the labor market, and production. The WEI is scaled to the four-quarter GDP growth rate; for example, if the WEI reads -2 percent and the current level of the WEI persists for an entire quarter, one would expect, on average, GDP that quarter to be 2 percent lower than a year previously.”

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