All of this on the outside chance of a Russian vaccine?


Graphic image of gold weathervane(USAGOLD – 8-11-2020 – LATE PM) – At times like these, it might be helpful to put things into perspective. We would point out first and foremost that gold is still up almost 26% and silver is still up 38% year to date. At some point along the way, when an investment is posting numbers like that, one might expect a correction – even view it as healthy. Let us not forget, too, that the levels of stimulus already injected into the economy have not disappeared and further massive stimulus, we are promised, waits in the wings.

We would also remind our readers that 5% single-day drops in gold are not unheard of. We had one back in March, for example, just before the subsequent rocket launch higher. In fact, gold has a long-standing reputation for taking the stairs up and the elevator down, so long time gold market participants will not be totally surprised by today’s reversal. That is not to say that precious metals will not go lower in the days ahead, possibly even a lot lower, but on the other hand, price corrections often encourage some judicious bottom fishing among those who read opportunity in price drops rather than disaster. With that thought in mind, it will be interesting to see how Asia responds when the market opens there in a few hours.

A couple of quotes from Myra Saefong’s gold column this afternoon at MarketWatch might add some perspective as well:

Edward Moya/Oanda: “Traders who were looking for an excuse to lock-in profits with their bullish gold bets jumped all over the Russia’s vaccine news.”

Brien Lundin/GoldNewsletter: “Gold and silver’s run over the past couple of weeks was dizzying in its trajectory and just about everyone marveling at that rise was expecting, and even hoping for, a correction. Well, it’s here, and the metals are simply releasing a bit of the air that had overinflated the market. There was tremendous anecdotal evidence that a great swath of investors had bought into the long-term story for gold and silver and were simply waiting for a pull-back to get in. I would expect there’s some reality to this view, and that we’ll see a big influx of investment once it appears that gold has bottomed.”

Buttressing Lundin’s observations, we have had a number of calls from long-standing clients this afternoon placing orders, or prepping to place orders, saying that they wanted to take advantage of the pullback.

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