Powerful gold rally overtuned by new virus strain and UK travel lockdown; now staging something of a recovery from $1856 low

(USAGOLD – 12/22/2020) – A powerful rally in overnight markets that took gold over the $1900 mark (to $1907) quickly ran out of gas on reports of a new coronavirus strain in the United Kingdom, a rapidly ordered EU travel lockdown, and a surging U.S. dollar. Inspiration for the overnight rally was news that Congress had finally stitched together a stimulus plan. The bad news, however, trumped the good news overturning the rally. Gold is now trading at $1888 after hitting a low of $1856 – up $2 on the day and staging something of a recovery. Silver, which suffered a similar fate, is now up 31¢ on the day at $26.20 (after being as high as $27.30). It looks like it is going to be a volatile start to the week. We will keep an ear to the rail and post an update at our Top News and Opinion page later today if circumstances warrant.

Chart of the Day

overlay line chart showing the correlation between negative yielding debt and the price of gold

Chart courtesy of the World Gold Council • • • Click to enlarge

Chart note: As this World Gold Council chart shows, there is a direct correlation between rising global negative-yielding debt and the gold price. Few economists believe that the trend of rising negative-yielding debt will reverse anytime soon.  In fact, the aggregate figure went over $18 trillion recently, a new record, with about $1 trillion going negative the week of December 7th, according to Bloomberg.

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