Dip buyers step-in to help gold regain bulk of yesterday’s losses; Degussa’s ‘world gold price’ hits new record high at just over $2400

(USAGOLD – 7/17/2020) – Gold regained most of the ground it gave up yesterday as dip buyers stepped in to take advantage of the lower prices. It is up $9.50 on the day at $1809 with the bulk of the gains coming during Asian trading hours. Silver is up 5¢ at $19.18. On the week gold is pretty much level while silver is up about 3.75%. We recall that dip-buyers similarly took advantage of price retreats at the psychologically important $1700 level back in May and June of this year.

“The ‘world gold price’ – that is (in our definition) the price of gold in basically all currencies excluding the US dollar – has hit a new record high [at just over $2400 per troy ounce]” says Degussa’s Thorsten Polleit in the firm’s monthly client letter. “It has now well exceeded its last record level seen in September 2011. As can be seen, the price of gold in US dollar has increased much less. The ‘gap’ between the world gold price and the US dollar gold price suggests that the Greenback is still the most preferred unbacked paper money in the world. Note in this context that a rising price of gold in terms of money units means that the official currencies are getting debased vis-à-vis gold – and the gold can be viewed as the world’s premier currency, its ‘ultimate means of payment.’”

Some analysts have suggested that, with the price of gold at all-time highs in most fiat currencies, it is only a matter of time until it achieves that same distinction against the U.S. dollar.

Chart of the Day

line chart showing stocks from 1929 to 1955Chart courtesy of MacroTrends.net

 Chart note 1: “I think we’ve got a second leg down,” says economist A. Gary Schilling in a recent MarketWatch article “and that’s very much reminiscent of what happened in the 1930s where people appreciate the depth of this recession and the disruption and how long it’s going to take to recover. … Stocks are [behaving] very much like that rebound in 1929 where there is absolute conviction that the virus will be under control and that massive monetary and fiscal stimuli will reinvigorate the economy.”

Chart note 2: Schilling joins a group of prominent economists and market analysts who see similarities between the 1930s and the present. His warning about a 40% drop prompts a quick review of the market action following the 1929 crash. The top (380) to bottom (43) decline occurred over a three year period from late1929 through most of 1932 and amounted to a more than 85% loss of index value. The Dow Jones Industrial Average did not return to its 1929 peak until late 1954 – 25 years after the Great Crash.

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