Afternoon Update

Gold finds itself stuck on the wrong side of a frenzy … at least for the moment

Cartoon by Ed Stein of dollars flowing in an hour glass and investor caught in flow saying 'keep printing'(USAGOLD – 1/8/2021) – It looks like gold will settle at $1852 – down $64 on the day.  Silver is finishing at $25.52 – down $1.66 on the day. To say that the investment world is at a loss to explain what happened in the gold market the past few days would be an understatement. Stretch that a bit, and we can say that most investors are equally perplexed by the delirious rise of Tesla and bitcoin. We come back to Jeremy Grantham’s comments (scroll down the page) about “waiting for the last dance.” The current market mania, he warns, “will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.”

In short, gold seems to have gotten itself stuck, for some inexplicable reason, on the wrong side of a frenzy, at least for the moment – one that involves not just the markets but possibly politics as well. “Biden,” writes analyst Barani Krishnan at Investing.com, “has also said he plans to push out at least two more comprehensive stimulus packages that could add trillions to the U.S. federal debt, already estimated at $3.8 billion for 2020. In ordinary times, the combined impact of such spending on the dollar logically makes gold a natural hedge. But these are extraordinary times when logic gets tossed out of the window. Treasury yields jumped 3% on the day and 21% on the week — the most since the week ended Aug 7, when a similar rally in bonds killed gold’s $2,000 plus rally.” That says it about as well as it can be said.

In the end, though, logic will prevail – or at least we believe it should prevail – and gold’s journey of the past few days could evolve into another one of those situations when it took the elevator down and now faces the challenge of taking the stairs back up. Gareth Soloway, the chief market strategist at InTheMoneyStocks.com, profiled courage in a Kitco interview earlier today as events evolved. “Gold is getting pounded today, and the one thing I would say to investors who are into gold,” he ventured, shaking his head, “is stick with it.…Look for gold to perform well even on the pullbacks. I would be a buyer today. I really would.”

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