Insights – is the ‘party’ in gold just getting started?
July 23, 2020
Gold Market Update
Gold prices edged higher on Monday as rising numbers of coronavirus cases around the world raised concerns over the pace of economic recovery, while investors awaited the European Union’s decision on a proposed recovery fund.
Spot gold rose 0.3% to $1,814.38 per ounce, while U.S. gold futures were also 0.3% higher at $1,815.70. Last week the USD gold price hit the highest level in 9 years.
Today it rose even further.
Coronavirus cases continue to surge in the United States, and experts at the U.S. Centers for Disease Control and Prevention have warned that cases and deaths could rise this autumn and winter.
The increase in the number of (Covid-19) infections in countries like the U.S., Brazil and India will make it take longer for economies to recover.
Uncertainties remain high, supporting gold prices.
Gold price this month in AUD/OZ
“It’s 2020 and we are currently living through unprecedented times. People and economies around the world are struggling and money is drastically losing value. However, there is one solution that has proven over and over again to be the safest form of investment: gold. And it’s this precious metal that is the main product of Aussie startup SendGold. For this episode of our ‘Leaders of Tomorrow’ webseries, Sendgold’s co-founder & CEO Jodi Stanton told us how they got started working on the app and what they are working on for the near future.”
Gold in the News
Here are a few articles trending on the subject of gold.
Gold prices keep rising, powered by a trifecta of uncertainty among investors, runaway government spending, and rock-bottom interest rates for years to come. Even though the metal has already come a long way, there’s not much to stop it from grinding even higher to new record highs: https://www.actionforex.com/contributors/fundamental-analysis/310171-is-the-party-in-gold-just-getting-started/
The World Gold Council’s 2020 Central Bank Gold Reserves Survey of 51 banks revealed that 88% chose “negative interest rates” as a relevant factor, which the council said would likely be reinforced in the post-COVID-19 era as “continued monetary expansion will keep global rates low or negative for the foreseeable future, a situation that increases gold’s attractiveness relative to fixed income.” https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/central-banks-still-bullish-on-gold-as-us-fed-flags-more-pain-from-coronavirus-59040493
Why ‘safe haven’ gold and the stock market are now moving the same direction. Efforts by global central banks to push down interest rates, which have fallen into negative territory in real or inflation-adjusted terms, in the U.S. and are outright negative in many parts of the world, mean that investors who hold gold aren’t missing out on the yield they would earn from holding bonds in more usual circumstances. https://www.marketwatch.com/story/why-safe-haven-gold-is-acting-like-a-risk-on-asset-as-it-soars-toward-an-all-time-high-2020-07-09
This week, we highlight a video on the subject of global macroeconomics on The Investor’s Podcast Network.
The podcast is quite dense and is aimed at market professionals, but we think it’s worth a listen by people who want to make sense of the current investment, economic, and political situation. It touches on the reasons to own gold in the current environment.
The podcast includes Grant Williams (a SendGold colleague who produced the excellent video series we highlighted in our previous newsletter) and analyst Luke Gromen.
Gold compared to U.S. Treasury bonds
Luke Gromen: “I would rather own a zero-interest bond with infinite duration and limited issuance (gold) than a super-low interest bond of finite duration and unlimited issuance (U.S. Treasuries).
Money printing versus tax receipts
Grant Williams: “For the first time ever, the amount of money printed by the Fed has exceeded the total tax receipts of the U.S. Government over the previous 12 months. They took in $3.26 trillion and they printed $3.31 trillion. When you talk about off the charts, they are literally off the charts”.
When the U.S. Treasury market ceased to function
Luke Gromen: “I think The Fed thought it was all fun and games with the risk-off until the Treasury market lost an eye. What we’re really talking about here, the United States for the first time in our careers and in our memories was seeing its sovereign bond market and its sovereign bonds underpin the whole shooting match, of course, they were trading like emerging market bonds with a fiscal problem”.
To listen to the Investor’s Podcast Network round table, click here:
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In the News
- What's behind the coronavirus gold rush?
August 8, 2020
- SendGold Live in India with UPI
September 1, 2020
- Jodi Stanton recognised at the Women Leading Tech Awards 2020
August 31, 2020
- Insights – A tale of two Buffetts
August 26, 2020