Gold pushes higher to start the week, silver up sharply. Will gold pick up market share as the new ‘bond trade’?

(USAGOLD – 7/13/2020) – Gold pushed higher to start the week on concern the worst of the virus is not yet behind us – that, instead, we could be facing a resurgence.  Bloomberg ran an article this morning under the headline “COVID-19 Reinvades States That Already Beat It Back Once” in which it says “Many places that suffered most in the first wave of infections, including California, Louisiana, Michigan and Washington state, are seeing case counts climb again after months of declines.” With the knock-on economic ill effects of the virus looking like they might retrench, even worsen, investor psychology once again turned to safe havens.  Gold is up $9 on the day at $1811.  Silver is up sharply – gaining 38¢ at $19.19.

“[I]f we embark in the world of constant monetary debasement in order to avoid a prolonged deflationary depression,” says Rothko Research in an advisory published at Seeking Alpha, “gold should continue to receive strong support and reach record highs against all currencies. … As central banks’ balance sheets are expected to reach stratospheric levels in the coming 12 to 18 months, it would be logical to see gold trending higher during that time period. Some investors expect gold to be the new ‘bond trade’, the trade that has been the biggest winner in the past 35 years. Now that long-term interest rates have reached the zero bound in all the developed economies, gold could gain a little share in the risk parity portfolios with investment managers replacing some of their bonds allocation by gold in the coming years. In addition to act as an inflation hedge in the long run (i.e., 1970s Great Inflation period), gold remains robust and sometimes also benefits from market shocks.” [Emphasis added.]

Chart[s] of the Day

Gold, silver and the DJIA – Year to Date

gold silver DJIA year to date through June 10 2020Chart courtesy of TradingView.com • • • Click to enlarge.

Gold, silver and the DJIA – One Year

gold silver djia 12 month performances through June 10 2020

Chart courtesy of TradingView.com • • • Click to enlarge.

Chart note: As of last Friday (6/10/2020), gold is up 26.8% over the past 12 months. Silver playing catch-up is up 22.93% and the Dow Jones Industrial Average is down 2.88%.  Year to date, gold is up 17.66%. Silver is up 3.94% and the DJIA is down 9.63%.

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