Gold and silver rocket higher on Europe stimulus package, silver up 18% over past month

(USAGOLD – 7/21/2020) – Gold and silver rocketed higher in overnight markets as European policymakers agreed to what CNBC is reporting as a $2 trillion overall fiscal stimulus package.  Gold is up $20 at $1840.  Silver climbed over the $21 mark to trade at $21.04 – up $1.06 on the day. Europe’s stronger than expected spending program could ignite a global competition among governments to ante up in the fight against the deflationary forces unleashed by the pandemic. Strong fiscal stimulus, though, combined with the aggressive monetary policies already deployed by central banks could be a prescription for runaway inflation down the road. Precious metals are reacting accordingly.

“What you’re going to see in the next decade,” says fund manager Diego Parrilla in a Bloomberg profile, “is this desperate effort, which is already very obvious, where banks and government just print money and borrow, and bail everyone out, whatever it takes, just to prevent the entire system from collapsing…What we’ve seen over the last decade is the transformation from risk-free interest to interest-free risk, and what this has created is a global series of parallel synchronous bubbles…One of the key bubbles is fiat currency, and one clear anti-bubble in this system is gold,” he said, adding that other examples are volatility, correlations and inflation. “It’s a case of when, not if, they will reprice significantly higher.” Parilla thinks gold could go as high as $3000 to $5000 over the next three to five years, as reported in that same Bloomberg article.

Chart[s] of the Day

gold seasonal chart 10 year average

line chart showing silver seasonality 10-year average

Charts courtesy of GoldChartsRUs.com

Chart note:  When we first posted these charts about a month ago, we alerted our readers that, “as unpredictable as markets have become, anything could happen – including a summer rally in precious metals prices.” Over the past 30 days, gold is up over 5% (as of today’s pricing) and silver is up over 18%!  As was the case in 2019, the summer doldrums have been pushed to the sidelines.

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