Gold, the ‘Currency of Last Resort’, Price Spikes


Tuesday, Gold prices marked their largest daily percentage gainer in more than 10 yrs as the precious Yellow metal extended its rally on demand/supply issues and moves by the Fed to address the coronavirus crisis.

The Fed announcement Monday “signals there is a new sheriff in town as the Fed committed to unlimited asset purchases,” said the director of research at GraniteShares, which offers the GraniteShares Gold Trust US:BAR. “This amounts to a systematic destruction of the dollar as has been known, a fact plainly beneficial to gold’s potential.”

Monday, the Fed announced that it will purchase an unlimited amount of Treasuries and mortgage-backed securities to support the financial market.

Meanwhile, 3 of the world’s largest gold refineries: Valcambi; Argor-Heraeus and PAMP suspended production in Switzerland for at least a week because of the mandatory closure of non-essential industry in the country to prevent the spread of coronavirus, according to a report from Reuters Monday. Together, the refineries process about 33% of total global annual supply, the report said.

Gold miner shutdowns is a factor the market is only starting to factor in whether Mongolia’s Oyu Tolgoi mine or now operations in Ecuador, Mexico and the US affected. The coronavirus impact on mining not only prevents an expansion of supply, but may actively contract new production at the very moment gold demand is surging.

Gold for April delivery US:GCJ20 on COMEX rose 93.20, or about 6%, to settle at 1,660.80 oz. The precious Yellow metal Tuesday booked its largest 1-day USD gain based on records dating back to November 1984, and biggest daily percentage rise since March 2009, according to Dow Jones Market Data.

In a Bullish early Tuesday research note, analysts at Goldman Sachs described the commodity as the “currency of last resort” and said that the market volatility tied to the outbreak of COVID-19, the infectious disease that has caused a shutdown in much of the world, will help drive prices of bullion higher.

We have long argued that gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now,” wrote analysts at Goldman Sachs.

On the COMEX, May silver US:SIK20 jumped 99.6c, or 7.5%, at 14.257 oz.

Have a healthy day, stay home!