Gold’s Journey to US$2,000 Marked with Unrest and Uncertainty

Precious Metals
Gold Investing

The yellow metal has gained 13.3 percent since the beginning of July, as it closes in on the US$2,000 mark.

Another day of gains drove gold above US$1,975 (July 27) per ounce, a new record-breaking level. The yellow metal has gained 13.3 percent since the beginning of July, as it closes in on the US$2,000 mark.

More price growth is forecasted in the short term as World Health Organization officials now believe a second wave of COVID-19 may be delayed as the first wave of the pandemic continues to register surges in new cases.

The weakening US dollar has also worked in gold’s favor, with the former reaching a two-year low as the later soared to new heights.

The Investing News Network reached out to market watchers and analysts to gain insight into gold’s recent activity and to see where the metal may go in the weeks to come.

For Adrian Day, monetary policy and the economic response to the pandemic has been the primary force behind gold’s ascent.

“I believe that is certainly one of the major factors,” said Day, who operates Adrian Day Asset management. “We also have the possibility of a second wave of COVID-19 as well as increased tension between the US and China, which certainly supports gold prices.”

A US$1 trillion stimulus proposal currently being mulled over by the US Congress and a US Federal Reserve meeting this week could also benefit gold.

“To a hammer, everything looks like a nail, and the Fed knows only one response to any crisis — increased stimulus,” he said. “They will say they want to return to normal, but at any economic slowing, they will increase stimulus.”

Mercenary Geologist Mickey Fulp also sees the weak dollar as a prime catalyst, but also attributed European stimulus to gold’s recent growth as more people rush to safe havens.

He also believes the price has gone up too far, too quickly.

“It has gapped up too high too fast, at this juncture (it is) overbought and due for a healthy correction,” said Fulp.

When asked if investors are taking the current climate seriously enough, Day said arguably not.

“Most investors are still underweight in gold, both retail and institutional investors. The current social upheaval is fundamentally different from, say, the 1960 flower power or previous race riots, or Vietnam protests because in the past there was always a strong institutional framework.”

Day then quoted Yeats saying, “the center cannot hold.”

“There is very little center in the US, with the country separating by very hard lines,” he added. “So the longer term consequences of this could be devastating. And let’s not forget that Fed easy money is partly responsible. The fed’s policies have widened the wealth gap; devastated savings; destroyed the middle class; and created a permanent underclass.”

The growing disparity between classes is the driver behind protests in Chile, Lebanon, Hong Kong and the US, according to Day.

“This widening wealth gap — artificially exacerbated by easy money polities — is always behind it.”

For Fulp, politics closer at home will be a primary factor in determining whether gold hits the US$2,000 an ounce threshold.

“Especially if the Dimpublicans and Republicrats keep playing politics over inner-city violence and anarchy and continue to destroy our small business and working class economy with shutdowns and lockdowns,” said the Mercenary Geologist.

Federal Reserve head Jerome Powell is scheduled to give a press conference Wednesday (July 29) afternoon. It is expected he will make announcements around the economic recovery and the future monetary policy.

As of 3:11 p.m. Tuesday (July 28), an ounce of gold was priced at US$1,54.65.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

The Conversation (0)