Gold consolidates around $1950 level after muted Fed meeting, markets await GDP number

(USAGOLD – 7/30/2020) –  Gold continued to consolidate, at least for now, around the $1950 level after a muted Fed meeting and press conference that promised more of the same but no new stimulus measures to boost the ailing economy. It is down $9 on the day at $1952. Silver is down $1.17 at $23.33. Expectations of a devastating GDP number a few hours from now are probably already built into the price, but anything greater than the expected 35% decline could send the markets reeling and the Fed chairman in search of his favorite headache remedy.

Many in the gold realm think a significant correction is in order after the dramatic gains of the past few months. Others believe any correction will be short-lived – that the recent past merely sets the stage for something even more substantial down the road (as reflected in the big bank forecasts we featured in yesterday’s DMR).

“In ancient times, heavenly alignments foretold doom,” writes Sharps Pixley’s Ross Norman in a market advisory this morning. “What would the ancients have had to say about the recent extraordinary planet parade when Mercury, Venus, Earth, Mars, Jupiter, Saturn, Uranus, Neptune plus the dwarf planet Pluto – all lined up together? And, at the same time, that most basic and primal of metals, gold, was also shooting up to the stars. When seemingly random and disconnected events align, they seem to exert a powerful force that goes beyond the collective gravitational pull of each component. So it has been for gold which has now risen by 30% this year, and the yellow stuff still has momentum. Gold’s dramatic spike is shining a light on some uncomfortable truths.”

Chart of the Day

a bar chart showing how various investments including gold perform under various economic worst case scenariosChart courtesy of World Gold Council • • • Click to enlarge

Chart note:  “These [multiple] factors,” says the World Gold Council’s Jennifer Johnson Carari, “increase the possibility of a stagflation scenario—an outcome nearly unthinkable only six months ago. As investment committees consider alternative economic scenarios, the greater possibility of stagflation would warrant increased attention to the performance of gold to meet real capital preservation investment objectives.” Former Fed chairman Alan Greenspan warned a couple of years ago that the global economy was headed toward a stagflationary breakdown  Few paid attention.  It was not too long ago that most in the mainstream media constantly touted gold solely as an inflation hedge despite historical evidence to the contrary – including its performance during stagflations, deflations and disinflations.

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