Gold takes breather from summertime push to the upside; TD Securities says metal in ‘midst of regime shift’ to inflation hedge

(USAGOLD – 7/7/2020) –  Gold – down $5.50 at $1780 – is taking a breather from its summertime push to the upside this morning.  Silver is down 16¢ at $18.19.  As pointed out yesterday, the rally in both metals since early May defies the sluggish market behavior usually associated with the summer months. Both metals turned in strong upside performances last summer, though for different reasons, so perhaps the seasonal June-July discount should no longer be viewed as a given. The rising prices this time around are most directly related to the economic ill effects of the coronavirus and the aggressive stimulus/rescue programs launched by central banks and governments around the world to combat it. Many investors see these policies as encouraging inflation down the road – potentially even the runaway variety.

“In precious metals,” says TD Securities in an analysis posted at FXStreet, “nearly every trading session in the past few months has a sense of déjà vu, as traders aggressively sell the yellow metal in response to risk-on, only to see gold grind higher shortly after. This trading behavior is entirely consistent with our market thesis – gold is the midst of a regime shift, transitioning from trading as a safe-haven asset to an inflation-hedge product. …Looking forward, the world-war era fiscal and central bank stimulus, the change in the central bank template that will incorporate ‘symmetric inflation targets’ and unwinding globalization, also suggest that inflation-hedge assets may grow in popularity.”

Chart of the Day

Gold Production by Country
(2019)graphic image map of gold production by country for 2019Image courtesy of World Gold Council • • • Click to enlarge

Chart note:  China is the top gold producer at this juncture but some analysts believe it may be surpassed in coming years by both Russia (currently number two) and Australia (currently number three). 

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