A golden future

EdisonGroup/Charles Gibson/June 2020

“Since the COVID-19 crisis hit, the Federal Reserve has returned to bond-buying with a vengeance. After cutting interest rates to (effectively) zero and initially saying it would buy US$700bn in bonds, on 23 March it removed the brakes stating it will ‘purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy’. With the total US monetary base now at US$5.1tn (and given the close historical correlation between the two), the gold price could very reasonably be expected to rise to US$1,892/oz and potentially as high as US$3,000/oz.”

USAGOLD note:  At $1892 to $3000 per ounce a “golden” future indeed …… The chart below shows the correlation between gold and the monetary base Gibson mentions in the snip above.

overlay chart showing gold and the monetary base June 2020

Sources:  ICE Benchmark Administration, St. Louis Federal Reserve [FRED]


Repost from 6-25-2020

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