Yahoo Finance/Bloomberg/Phoebe Sedgman
Gold Set for Best Month in Four Years After Record-Breaking Gain
Gold is set for the biggest monthly gain in more than four years after a weaker dollar and low rates fueled its surge to a record. Silver headed for its best month since 1979.
Spot bullion is up 10% in July as a gauge of the dollar slumped, prompting concerns its status as the world’s reserve currency of choice is at risk, and U.S. real yields fell to a record low. While the ferocity of gold’s rally cooled as the week wore on, it’s less than $20 shy of its all-time high and most market watchers predict there may be more gains ahead.
The metal has surged almost 30% in 2020, putting it on track for the biggest annual increase in more than a decade, as concern about the fallout from the coronavirus pandemic boosts its appeal as a haven. The Federal Reserve this week repeated a vow to use all its tools to support the U.S. economy, with governments and central banks worldwide already unleashing vast amounts of stimulus to shore up growth.
“There is still plenty of upside left in this rally,” Australia & New Zealand Banking Group Ltd. said in a note. “The backdrop remains highly conducive, with unwavering support from central banks likely to see monetary easing policies remain in place for the foreseeable future.
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CNN Business/Anneken Tappe
Dow and S&P 500 sink after economic data deluge
The Dow and the S&P 500 ended in the red on Thursday. Investors are still wrapping their heads around the morning’s economic data including the GDP report, which finally put a number on just how badly the economy fared during the spring lockdown, as well as an increase in weekly jobless claims.
US gross domestic product, the broadest measure of the economy, plummeted at an annualized rate of 32.9% between April and June, the worst drop on record. While the decline wasn’t as bad as economists had predicted, it hammered home just how much the economy suffered at the height of the pandemic lockdown.
Meanwhile, the Labor Department reported a second-straight uptick in first-time applications for unemployment benefits Thursday morning. This is worrying because it could signify a slowdown in the labor market recovery.
The bottom line is that the US economy runs on consumer spending, but people spend less money when they are unemployed.
$15,000 gold price? Jim Rickards and Peter Schiff give forecasts
Gold prices have hit all-time highs, but industry heavyweights Jim Rickards, best-selling author, and Peter Schiff, CEO of Euro Pacific Capital, both think that the rally is far from over.
Rickards’ analysis points the gold price to $15,000 by 2025.
“I would put [gold at $15,000 an ounce before 2025,” Rickards told Kitco News. “If you just take the average of the prior bull markets: 1971 to 1980, nine years, 2200%, 1999 to 2011, a twelve-year bull market, about 700%. Just take the average, you don’t have to go to the higher of the two or extrapolate, if you just take the average of the two you would say the next bull market is going to be a little over 10 years and it’s going to go up 1500%,” he said.
$15,000 is the implied, non-inflation price of gold should a gold standard be adopted, theoretically speaking, said Rickards.
Schiff pointed out that historically, the Dow/gold ratio has seen much higher levels than today, suggesting that should the ratio retrace historic levels, the gold price should be much higher.
Dollar on course for worst month in decade as U.S. recovery loses steam
The dollar slipped to two-year lows on Friday and is on track to post its biggest monthly decline in 10 years, as investors worried that a recovery in the U.S. economy could be stymied by a second wave of coronavirus.
Confidence in the U.S. currency was undermined further after U.S. President Donald Trump raised the possibility of delaying the nation’s November presidential election.
The dollar index fell to 92.777, and is on course to post its biggest monthly fall in 10 years.
“At the root of the dollar’s weakness is the fact, which was highlighted by Fed Chairman (Jerome) Powell the other day, that U.S. coronavirus cases started to increase in mid-June, curbing consumption and sending the economy downhill,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
The U.S. Labor Department data showed initial claims for unemployment benefits increased 12,000 to a seasonally adjusted 1.434 million in the week ending July 25, a sign that recovery in the employment market is stalling.