Gold holds it own as uncertainty remains over trade, Brexit, Fed rescue operations in repo market

Gold holds it own as uncertainty remains over trade, Brexit, Fed rescue operations in repo market by Michael J Kosares for USA Gold

Gold held its own in overnight markets and early in U.S. trading as hoped-for resolution gave way to continued confusion on the trade issue, the results of the British election and most notably overnight repo market liquidity.  It is trading at $1469 – up $4 on the day after yesterday’s nearly $15 retreat.  Silver is up 2¢ at $16.90.  China has scheduled a news conference to begin shortly. A victorious Boris Johnson now with a solid majority promised Brexit by January 31, and the Fed announced a $500 billion rescue program for the stressed overnight repo money market.  It is that last event that might be the most consequential for financial markets in the short to medium term, though a weaker or stronger than expected trade agreement could also raise the temperature level on Wall Street.

Given the rising level of uncertainty on several fronts, we return to a quote from a Goldman Sach’s client advisory referenced here a couple of days ago.  Featured as a Yahoo Morning Brief under the headline (The world’s super-rich are hoarding gold), the advisory notes that “since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs.”  In other words, safe haven investors are hedging with actual coins and bullion over paper gold ETFs. “Finally,” says Goldman, “this build can also reflect hedges by global high net worth individuals against tail economic and political risk scenarios in which they do not want to have any financial entity intermediating their gold positions due to the counter-party credit risk involved.”

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