Gold pushes back over $2000 on persistent dollar deterioration

Gold pushes back over $2000 on persistent dollar deterioration by Michael J Kosares for USA Gold

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Gold pushed back over the $2000 mark in overnight trading with persistent deterioration of the U.S. dollar the principal influence. The greenback was down for the fifth day in a row and at its lowest level in two years with a sharp decline against the Japanese yen leading the way. Gold jumped $40 yesterday and it is up another $28 today at $2015.  Silver is up 87¢ at $28.29 after a 90¢ rise yesterday.

Addressing the recent brief drop in the gold price from the $2070 record high to near $1900, Bloomberg’s John Authers says “[l]ower real yields make gold, which pays no yield, that much more attractive, so a brief correction in real yields helps to explain a brief correction in gold. That is what the recent drama looks like at this point. At no point did gold drop below even its 50-day moving average, suggesting that its short-term upward momentum remained unchecked, even by a fall of 10%. That correction bottomed shortly after the inflation number came out. The rebound since suggests that the upward trend is thoroughly intact.”

Chart of the Day

overlay chart showing the Weekly Economic Index and gold AUG 20Sources: Daniel Lewis, St. Louis Federal Reserve [FRED], ICE Benchmark Administration

Chart note:  As you can see, the drop since early March in the Weekly Economic Index is worse than the one during the 2008 financial crisis. As a matter of interest, we added the price of gold. At the moment, the index is in recovery mode though it still appears a bit weak at this juncture, as it did the first time we ran this chart a month ago.  Stay tuned.  We will repost this chart at from time to time to see if we get a “V”, “W”, “Nike swish” or “lightning bolt” – and gold’s response.  Please note that the St. Louis Fed now incorporates a recession bar in 2020 (in grey).

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