Gold breaches $1800 for the first time since 2011 on strong yuan, COVID-19 concerns

(USAGOLD – 7/8/2020) –  Gold breached the $1800 this morning for the first time since 2011. It is trading at $1806.50 – up $9 on the day.  Silver is up 22¢ at $18.57. Today’s advance follows a strong showing yesterday that coincided with sharp appreciation in China’s yuan and growing investor concern about a resurgence of COVID-19 cases within the United States. Many analysts and investors see the aggressive stimulus policies launched by governments and central banks globally as encouraging inflation down the road – potentially even the runaway variety. The unconventional summer rally in gold and silver that began in early May defies the sluggish market behavior usually associated with this time of year. Gold is up almost 7% and silver over 24% (!) since May 1.

“As of right now,” says markets analyst Frank Holmes in a recent advisory posted at Forbes, “the Fed’s balance sheet stands at $7 trillion, or 33% of US GDP. And earlier this month, the Treasury’s public debt soared past $26 trillion, an incredible 120% of the entire US economy. This isn’t sustainable, obviously, and some analysts now see Dollar-denominated gold hitting a new all-time high in the next 12 months, even in a risk-on environment. Both Morgan Stanley and Citigroup maintain their call for $2000 gold by mid-2021. London-based research firm Edison goes even further. In a note dated June 23, analysts there commented that gold should be near $1900, ‘with the potential for this to rise to in excess of $3000.'”

Chart of the Day

bar chart showing the growth in the national debt thus far in 2020

Chart note: The additions to the national debt thus far this year have been nothing short of astonishing – $3.22 trillion since January 1, 2020, and $678 billion over the past 30-days (through June 30 ). One wonders how much debt the U.S. Treasury can place with private and international investors and how much will be financed via the Federal Reserve’s bottomless checkbook.  Though few on Wall Street (or Main Street for that matter) would quarrel with the spending decisions governments have made in recent months, a good many are preparing for the potential consequences – whether those policies succeed or fail. That is where gold might come in handy.

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