“Like stocks, the gold market believes the Fed’s easy money plus big deficit spending by government will beat COVID-19’s deeply deflationary impact“– Paul Ebeling
Gold futures rose Monday on a softer USD and fresh talk of a aid/relief/stimulus deal supporting prices for the precious Yellow metal.
Bullion’s advance remains threatened by increased appetite for risk as markets react to promising developments in President Trump’s speedy recovery from the China virus.
Add to that, renewed hope for a fiscal stimulus deal provided support for gold.
Treasury Secretary indicates that progress being made on coronavirus air/relief/stimulus legislation.
Gold for Dec delivery rose 12.50, or 0.7%, to settle at 1,920.10 oz, after posting a 2.2% weekly gainer to close out Friday’s run.
Silver for Dec delivery added 0.53 or 2.2%, at 24.56 oz, following a 4.1% rise in the Devil’s metal last wk.
The ICE US Dollar Index .DXY declined 0.4% Monday, the index measures the USD’s strength Vs 6 peer currencies. A weaker USD can make asset’s priced in it more expensive to overseas buyers.
“Get ready America, gold is now positioned to continue its upward movement. This is due in part because of a weakening of the American Dollar and trade deficits. In the short term we can not cure either of the latter for we want the US Dollar to continue to fall in order to better position American exports. It also caused our domestic consumption to buy American and that’s healthy for the American worker.
“People look to gold as a security blanket and there is nothing wrong with that, except to drive gold prices upward. Even though gold is no longer used as a primary form of currency in developed nations, the yellow metal continues to have a strong impact on the value of those currencies.
“Moreover, there is a strong correlation between its value and the strength of currencies trading on foreign exchanges. Particularly concerning is the falling of the US Dollar and our trade deficits plus our increasing Federal deficits in the short term. Further there is no defined period of timetable when these concerns will be cured. Of note is that the U.S. government budget deficit will triple this year to $3.3 trillion, soaring to the largest percentage of gross domestic product since 1945, the Congressional Budget Office (CBO) projected recently. As a result, federal debt held by the public is expected to hit 98 percent of GDP in fiscal 2020, which ended on Sept. 30th, and is expected to exceed the size of the economy by 2021, the CBO reported in updated projections.
“Thus, anticipate the price of gold will continue to rise as speculation will also come into play, adding fuel to the pricing fire“, says gold specialist Bruce WD Barren.
Have a healthy day, Keep the Faith!