Augured: The gold ship has sailed Or, Gold price rise slowdown?

The real world was ablaze during the week as a fly landed on the Vice President during debates and President Trump with Covid-19 lurched toward election night. The markets’ decline ended with solid (3%+) advances in the equity indices. Gold was down for the week by $19 and the dollar up by 0.83 cents. The markets seemed to begin to cotton to the idea of Dem again in the White House. But they go as the wind blows, don’t they?

"You can observe a lot by just watching." - Yogi Berra

Barrons’ Commodity desk says new highs for gold are not easily to be reached. “Gold was up by close to 40% for the year when it hit a record high in August, but it has since nearly halved that gain, and some analysts say a move to fresh all-time highs in the final quarter may be out of reach for the precious metal. Futures prices for the precious metal settled at a record $2,069.40 an ounce on Aug. 6. On Oct. 7, it settled at $1,890.80, up 24% year to date,” writes Maya Saefong.

Maya turns to Matt Orton, vice president at Carillon Tower Advisers, who says:

“Negative U.S. real rates have stabilized and started to move higher in August,” with gold moving lower as a result, Orton says. The impact of real rates and the dollar are key drivers of gold prices, not equity investor sentiment, and “with economic data continuing to show signs of a recovery, I would expect this rise in real rates to continue, as well as a general strengthening of the dollar—an additional headwind for gold.” Moreover, prices for the metal aren’t likely to reach new record highs in the near future.

In the old world of extraordinary events - gold sentiment might be fevered. But extraordinary is ordinary in the new normal.

Interest rates are set near zero for the rest of our useful lives, and inflation is like the ride you are expecting to dance – its on the way but never shoes up. But that is a convention. There are other points of view. Just such a contrarian view comes by way of Peter Orszag writing on Bloomberg Quint in a story entitled “Maybe low interest rates won't last forever” - this is an opinion piece that reviews a provocative new book by Charles Goodhart an Manoj Pradhan - the latter of talking heads macro an the former of the London School of Economics. Basically they say that as the world grows older and younger on two sides of the workforce that the workforce will not be big enough to curb inflation in the way it has in recent years thanks to the expansion of China. The authors expect nature is to go up along with inflation. Orszag does not fully embrace the premise, but opines that a good dose of going against the conventional grain is always an elixir. People last week watching the dollar go up and gold decline might take special note. As you know, it’s said a rebound US dollar is crushing gold.

You may ask: What about Silver, and other metals? Well, Silver had a greater runup percentage wise this year, and then a more precipitous fall. 

The Ahead of the Herd Newsletter predicts robust demand for all metals going forward. The government cant afford to let interest rates rise, they say. Low rates, rising inflation and (thus) negative real rates are "a surefire catalyst for gold and silver," they continue. While Covid-19 confronts some sectors, for mining, it's 'business as usual'' the Ahead of the Herders hark.

Once expected Stimulus 2 is no longer expected in 2020. Gold may inch up slowly, and then more stridently if more fiscal stimulus comes with the new year. It has no yield, but could buttress certain portfolios.

In a world of extraordinary events - gold sentiment might be fevered or sanguine. But extraordinary is ordinary in the new normal. - B.B.

Related 

Dollar crushing gold - Marketwatch

New gold highs out of reach? - Barrons

Low interest rates may not bide - Bloomberg quint

Demand  for metals rising - Ahead of the Heard