Gold drifts lower in quiet summer trading, keeps foothold above $1800

(USAGOLD – 7/15/2020) – Gold drifted lower in quiet summertime trading managing to keep its foothold above the $1800 mark, but not inclined at this juncture to move aggressively in either direction.  It is trading at $1808 – down $1 on the day.  Silver is up 9¢ at $19.39.  At the same time, demand for the metals is steady among investors, including professional money managers who see real rates of return narrowing, stock markets globally looking increasingly overvalued, and cash presenting itself as a viable alternative.

Bank of America’s head of derivatives research, Franciso Blanch, had some interesting things to say along these lines during a recent Bloomberg interview:  “If you put the three together – extremely lax fiscal policy, extremely lax monetary policy, and a huge increase in bank deposits, I think there is a pretty good chance here we will see a big rotation into gold driving prices a lot higher.  Investors are confused. They do not know what to do with their asset allocations and I think a lot of them will choose to go for the yellow metal as an alternative to cash in their portfolios … and by the way when I say investors, I don’t just mean retail investors, I also think institutional investors are going to make that choice.” 

Blanch forecasts a return of inflation pointing out that the Fed has “done in 18 days what it took almost nine months to do in 2008 and 2009.” Bank of America recently upped its forecast for gold over the next 18 months to $3000 per ounce. 

Chart of the Day

overlay line chart showing gold's strong performance in the rupee, euro, yen, pound, yuan and US dollarChart courtesy of TradingView.com

Chart note: Over the past twelve months, gold has risen sharply in six of the world’s top currencies – Indian rupee (+39.97%); Chinese yuan (+29.8%); U.S. dollar (+27.51%); British pound (+26.79%); European euro (+27.04%), and Japanese yen (+26.08%).  The rising tide in those currencies represents concern among the citizenry of each country in further debasement of the national currency and attendant systemic risks. (All as of 7/10/2020)

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