Gold Regained Traction and Climbed to $1,200 Again
Gold had its first weekly gain in over a month this week. By Friday with gold prices up $20, gold regained traction enough to remain firmly over the $1,200 mark. It had been wavering back and forth over $1,200 earlier in the week though. Metals had been under a great deal of pressure lately from the dollar. Silver was up 30 cents Friday and moved in tandem with gold against the dollar.
What this means for investors: Investors are seeing an upside to gold. Buyers seem to think gold had hit a bottom and is going to keep climbing now. Dollar weakness was a major factor in gold prices being up this week.
Weaker Dollar and Uncertainty as Trump Finds Fault with Fed
The dollar lately has been in high global demand as the safe haven by choice in the ongoing trade war and tariff retaliation between the world’s largest economies. This week though, the dollar pulled back after some comments that the President was “not thrilled” with current Fed direction on interest rates. In a Reuters interview, Trump admonished Fed chairman Jerome Powell for not doing enough to boost the economy. The Fed had its annual summit in Jackson Hole to discuss rate increases and the economic outlook. The decision was reached to delay with a rate hike and rather put off the hike until September. In the same interview, Trump also criticized China and Europe of manipulating their currencies to the detriment of the U.S.
What this means for investors: It isn’t the first time that the President has criticized the Fed. The President and the Fed are going opposite ways in fiscal vs monetary policy. Some analysts see this as the President trying to protect himself in the event of an economic recession. The perfect storm of tariffs, trade war, and rising rates happened before in 1930 and exacerbated the Great Depression.
Sanctions and Gold
This week, new sanctions against Russia are taking effect. As sanctions ramp up, Russia’s accumulation of gold and discarding of U.S. debt ramps up as well. Russia isn’t the only country dumping U.S. debt either. Turkey is as well as its currency sharply declines and they turn to gold as a refuge. Gold continues to prove it’s the ultimate safe haven refuge when planning for downturn.
What this means for investors: China and the U.S. also slapped new tariffs on each other this week. Since the trade tensions between China and the U.S. kicked off, there has been far less uncertainty and safe haven trading in gold happening than one might expect. With indications lately that the trade war is ramping up rather than abating any time soon, the gold trade will catch up.
Gold Output to Slow
Analysts expect gold output to hit generational lows in the next few years. Mines in Australia and Peru in particular are approaching peak gold, and will struggle in the coming years. Over the next year or so, output is going to peak, and then reverse. In fact, miners forecast that output will sink 15% by 2022. In Australia, it will be a record 33% sink in 3 years.
What this means for investors: Lower supply means higher prices – especially as production costs go up. This is just one factor that could have an impact on gold within a few years. With prices already low now and factors like the dollar and a record stock market (now the longest bull market) putting pressure on metals’ prices, it’s something to factor in when looking at long term gold investment.
VOTE FOR DR. KELLI WARD THIS TUESDAY
To our Arizona clients and subscribers- The Primary Vote is this coming Tuesday. I supported Kelli when she ran against John McCain and I support her now as she runs for the seat vacated by Jeff Flake. Let’s take the first step to getting Dr. Ward in the U.S Senate this Tuesday!
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.