Gold Will Beat U.S. Stocks in Turbulent Market, Strategists Say

Gregor Stuart Hunter, Bloomberg News

A worker lifts a gold ingot from a cooling bath at the Uralelectromed Copper Refinery, operated by Ural Mining and Metallurgical Co. (UMMC), in Verkhnyaya Pyshma, Russia, on Thursday, July 30, 2020. Gold surged to a fresh record Friday fueled by a weaker dollar and low interest rates. Silver headed for its best month since 1979. Photographer: Andrey Rudakov/Bloomberg

(Bloomberg) — Gold and U.S. stocks could part ways during a fresh round of market turbulence, ending a three-month period in which their returns were almost yoked.

Renewed deterioration of the global economy and more lockdowns to prevent Covid-19 from spreading should hit equities but leave gold standing, according to Societe Generale.

“While the correlation between gold and equities has turned unambiguously positive since the March lows in risk assets, another serious bout of risk aversion could cause the performances of equities and gold to diverge,” SocGen strategists including Jitesh Kumar wrote in a note dated Aug. 4, echoing comments from other strategists.

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How China & Russia’s De-Dollarization Could Boost Record Gold Rally

China and Russia are ditching the U.S. dollar at a faster pace. In the process, they are fueling the record rally in gold.

  • In U.S. dollar terms, the price of gold has hit a new record high at $2,055.
  • Strategists and politicians fear that the U.S. dollar is at risk due to various macro factors.
  • Russia and China’s acceleration of the “de-dollarization” process puts more pressure on the dollar.

China and Russia are ditching the U.S. dollar at a faster rate. In the process, they are indirectly fueling the record gold rally.

Since July 1, the price of gold has increased from $1,454 to $2,055 at the most recent peak–a gain of 41.3%.

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Gold Price Surges Over $2,000/oz For The First Time In History

Gold Breaks $2,000/oz and Surges to $2,042/oz – New All Time Record Nominal Highs

◆ Gold surged past the important $2,000/oz level to a new record high today due to concerns about the outlook for stocks, bonds and other assets in an increasingly vulnerable U.S. and global economy.

◆ Gold has surged to new record highs in all major currencies today including new record highs in British pounds at £1,554/oz and in euros at €1,720/oz due to concerns about the outlook both for assets and currencies such as the euro, pound and all fiat currencies.

◆ The price of gold surged over $2,042/oz, supported by the mounting virus and economic lockdown fallout and record deficit spending by governments and central bank currency creation to buy bonds and others assets in the debt laden financial system.

◆ The explosion and destruction in Beirut highlighted the risk of war in a very unstable Middle East and a scramble for safe haven assets as some 2,700 tonnes of ammonium nitrate exploded in Beirut, reducing parts of the Lebanese capital to rubble.

◆ Gold has reached new record nominal highs due to a combination of financial, economic, monetary and geopolitical risks and many analysts are forecasting further gains in the coming months with the $3,000 per ounce level being call for by many analysts including GoldCore.

◆ There are increasing concerns about the value of the dollar and other currencies due to currency creation on a scale not seen since Weimar Germany. This comes at a time when savers are not getting any yield on their bank deposits and are increasingly facing negative rates on depreciating currencies.

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PRECIOUS-Gold bursts through $2,000/oz barrier to new record

* Gold needs a period of consolidation -technical analysts

* Silver rises to more than 7-year high

By Eileen Soreng

Aug 5 (Reuters) – Gold soared to a record high on Wednesday as a weakening dollar, falling returns on U.S. bonds and a break above historic resistance at $2,000 an ounce added momentum to buying by investors seeking a safe store of value.

As the COVID-19 pandemic has roiled markets, gold has gained nearly 35% this year and is one of 2020’s best performing assets.

Investors fear economic stimulus unleashed in response to the pandemic will trigger inflation, devaluing other assets, and keeping bond yields historically low, which enhances the appeal of non-yielding gold.

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Silver Just Had Its Best Month In 40 Years: Here Are July’s Best And Worst Performing Assets

by Tyler DurdenMon, 08/03/2020 – 13:22

When looking at the torrid market performance in July, Deutsche Bank’s Jim Reid notes that silver (+35%) had its best month since December 1979 while the dollar the worst for a decade. US equities had a good month in spite of rising virus caseloads due to a strong earnings season relative to expectations, especially in tech towards the end of the month. YTD Silver, Gold and the NASDAQ have been the three best performers while at the bottom of the leaderboard Brent, WTI and European Banks are all down at least 30%.

Below we present some of the key highlights from Deutsche Bank’s July 2020 performance review

While July proved to be another decent month for risk assets, it was the performance of two other assets in particular which caught the eye. The first was Silver, which had its strongest month since December 1979. The second was the weakness in the USD, which ended with the USD spot index dropping by the most in a single month since September 2010.

Indeed the impact of the latter was fully felt when looking at returns in USD terms, with 36 of the 38 assets in DB’s sample finishing with a positive total return. In local currency terms, that number dropped to a still-impressive 30 assets. As markets move into August, typically a more subdued month for volumes but perceived to be a weaker month for risk, the focus remains on the reopening of economies on the one hand and signs of rising cases in certain countries on the other.

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Silver down over 3% on the day as buyers show further signs of exhaustion for now

Silver falls to $23.50 and back under its 100-hour moving average

Silver 30-07

The moves in silver and gold remain a major theme in the market this week and we are seeing further signs of a pullback with silver down by over 3% on the session now.
More notably, price action is starting to break its 100-hour MA (red line) after having twice moved below that but only to hold at that level in the end this week.
If anything, this points to further signs of exhaustion on the part of buyers – for now.
Gold is also down by nearly 1% to $1,951.75 currently as the dollar is keeping firmer.
In the case of silver, there is some support from the overnight low @ $23.34 next but the 28 July low @ $22.31 will be one to watch moving forward if sellers are to try and push for a sharper pullback after the parabolic rise over the past two weeks.

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Precious Metal ETFs Shines in July

Amid rising U.S.-China tensions and worsening COVID-19 crisis, precious metals have become attractive and more appealing to investors. Gold has skyrocketed to an all-time high nearing $2,000 per ounce while silver has jumped to the highest level of nearly $25 in seven years.

The weakness in the U.S. dollar against major global currencies also raised the metal’s attractiveness, as it does not pay interest like fixed-income assets. The Bloomberg Dollar Spot Index is poised for its worst July in decades, having lost 3.9% so far this month. The index is trading at the lowest since 2018. Additionally, massive liquidity injections by central banks across the globe and hopes of further stimulus supported the price of metals.

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Silver to surge above $35 after taking a breather – Credit Suisse

Silver has established its looked for base and has already moved to the first resistance at $26.09/22. Whilst strategists at Credit Suisse look for a pause here, they see scope for further gains ahead, ideally to $35.23/365. 

Key quotes

“Silver has seen an even more dramatic move higher than Gold over the past few weeks, confirming the flagged multi-year base above $19.65, and strength has already extended to our flagged resistance at $26.09/22 – the 38.2% retracement of the entire 2011/2020 bear market and key lows from 2011 and 2012.”

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Silver Nears 7 Year High, Closing in on US$30

Silver edged above US$26 per ounce on Monday (July 27), adding more that 31 percent to its value since January.

Safe haven demand and record exchange trade fund (ETFs) inflows have been the primary catalysts for the metal’s sustained growth in Q2. Reinvigorated animosity between the US and China, and concern a second wave of COVID-19 will further weaken the global economy have been key drivers recently.

The white metal is now back in territory unseen since September 2013, with motivators in place to move it higher.

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