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The power of gold; Above $1800 and at the highest value since 2011

Commentaries & Views

Gold surged above $1800 in trading today, closing above that key resistance level. Traders in New York took the price of gold futures to $1808, which is a net gain of just over $14. This is the highest value that gold has obtained since the net result of the financial crisis of 2008 took gold above $1900 in 2011.

This is this second attempt to trade and close above $1800 over the last month. That price point has served as a technical resistance level. The first attempt occurred recently, however gold was unable to sustain pricing above $1800. During that failed attempt gold retraced to approximately $1765.

However, over the last three trading sessions gold prices have closed higher for three consecutive days, with each day having a higher high and higher low than the previous day. Today is the third consecutive day of higher closes, the distinction is today’s close was well above $1800.

As of 4:00 PM EDT gold futures basis the most active August contract is fixed at $1807.50, a net gain of $14 (+0.78%). Concurrently spot gold gained $11.65 (+0.65%) and is now within striking distance of $1800 per ounce with a close of $1794.50. According to the KGX (Kitco Gold Index) spot gold is currently fixed at $1796.50 which is a net gain of $11.40 on the day. On closer inspection today’s gains due to trading were actually $15.30, however dollar strength took away $3.90 in value resulting in a net change of $11.40.

Both the overseas equities and United States equities were lower today. Recently equities worldwide have been moving higher as the coronavirus pandemic continues. Many analysts including myself believe that there is a basic disconnect between recent moves in equities and the current state of the pandemic.

This disconnect was the key topic presented by Robert Shiller in MarketWatch today. In an article titled “Robert Shiller explains the pandemic stock market and why it’s decoupled from the economy”, he explains his belief that the recent performance in the stock market during the pandemic “seems to defy logic”.

“The more economic fundamentals and market outcomes diverge, the deeper the mystery becomes, until one considers possible explanations based on crowd psychology, the virality of ideas, and the dynamics of narrative epidemics. After all, stock-market movements are driven largely by investors’ assessments of other investors’ evolving reaction to the news, rather than the news itself.”

His concern has been echoed by many other analysts as market participants and traders continue to have renewed concerns about the financial impact and economic fallout that is inevitable and based upon the expenditures of countries worldwide.

The United States has allocated roughly $6 trillion through a combination of aid packages passed by the House and Senate as implemented by the Treasury Department, and the current action of the Federal Reserve. Globally, central banks have also provided tremendous liquidity through their accommodative monetary policies.

The hard fact is that this global pandemic could remain active for much longer than anticipated. Dr. Fauci today warned that we are, “still knee-deep in the first wave and unlike Europe, U.S. communities never came down to baseline and now are surging back up.” His statement indicates that at least in the United States until a vaccine is created this pandemic could linger for an uncalculated period of time.

Obviously the longer the pandemic lasts the greater the expenditures will be needed to ensure both aid packages are available to those in need, and the needed monetary expenditures to aid an economic recovery from a still yet undetermined and unprecedented. Which is why the economy will face a fallout that is unprecedented as well, although it may take time for many to come to the realization.

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Wishing you as always good trading and good health,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.