Gold plunges on options expiration, safe haven flight and concern about a stimulus package before the end of the year

(USAGOLD – 11/24/2020) – Gold plunged again this morning in a continuation of yesterday’s selloff. In the absence of any other clear indicator or news of consequence, the primary culprit appears to be today’s options expiration on the December COMEX gold and silver contracts. Options expiration dates – and December is a high volume contract  – are often accompanied by stiff price corrections. Gold is priced this morning at $1813 – down $28 from yesterday’s close. Silver is down another 43¢ at $23.26. In addition to options expiration, traders are selling the metals based on a general flight from safe havens to risk assets and continuing speculation that a stimulus package might not materialize before the end of the year. For gold, some technical analysts are pointing to $1800 as a support zone that if breached could lead to further selling.

While we wait for the dust to settle on the commodities exchange, here is some food for thought from Bloomberg economists Tom Orlik and Bjorn van Roye.

“Who won the Cold War? Maybe China. … In hindsight, the conclusion of the Cold War – hailed as the end of history – was really just the closing of one chapter and the start of another. The world is in the midst of a messy transition as the balance of economic and political power shifts from West to East, from free markets to the state and from democracies to authoritarianism and populism. For businesses, investors and policy makers, history isn’t over. It’s just getting started.” –  An Economist’s Guide to the World in 2050 (November 11, 2020)

Charts of the Day

Euro Area Central Bank Balance Sheet


Japan Central Bank Balance Sheet


United States Central Bank Balance Sheet


China Central Bank Balance Sheet


Chart note:  For the record, the charts on quantitative easing in various economies from 2000 to present. The most notable feature for Europe, Japan, and the United States is the pandemic-related surge in 2020. China is lagging on a relative basis and that might be one of the reasons why the Chinese yuan has been in an upswing over the past few months.

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