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(Bloomberg) — Investors continue to pile into gold as prices advanced for a fifth day, moving ever closer to the all-time high reached in 2011. A weaker dollar, negative real rates, worries over the economic cost of the pandemic and flaring political tensions have both gold and silver heading for their biggest annual gain in a decade. Silver, which rallied 20% over the previous four days before
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As liquidity stemming from monetary and fiscal policy remains rife, cross-asset correlations are elevated, most notably this has been evidenced by the continued strong relationship between equity and FX markets. As market volatility drifts lower, high beta currencies have taken its cue from the pick-up in equities, which has largely come to the detriment of the US Dollar. As we highlighted yesterday, the negative relationship between the US Dollar and stocks is its strongest in several years. Put simply, the longer equity markets edge higher, the longer the downtrend in the greenback.
The Swiss private bank sets out the reason for holding the yellow precious metal in portfolios. The commentary is another turn in the debate about the role gold should play in wealth management.
The case for gold often arises when risks appear to be higher than normal, or when fears erupt that the value of government “fiat” money is going to erode. Massive central bank quantitative easing – aka money printing – and the impact of the global pandemic create plenty of risks in the investor’s mind, even if it turns out that central bank new money gets mopped up before problems arise. This is a classic “safe haven” asset. Debate remains: the very time that a person might want to access their gold might be a time when governments try to seize it – as happened during the 1930s in the US.
The 1838-C quarter eagle is an extremely popular coin among early gold enthusiasts. It is a first-year-of-issue and one of just two Charlotte quarter eagles that use the Classic Head, obverse mintmark design. All known examples exhibit a re-punched mintmark, that was initially entered too low. Writing in his Charlotte Mint gold coins reference (2008), Doug Winter says the 1838-C quarter eagle “Usually seen in VF and EF grades, it becomes very scarce in properly graded AU55 to AU58 and rare in Uncirculated.” NGC has recognized only a dozen uncirculated pieces.
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Far from being mired in the summer doldrums, precious metals markets appear to be on their way to making this summer one for investors to celebrate. $20+ silver and new record highs for gold are both well within reach.
Even as the big tech stocks that make up the Nasdaq are posting rip-roaring gains, the best performing sector of 2020 has actually been the gold miners. The HUI gold mining stock index is up 30% year to date – and up over 90% since bottoming in March.
Investors who bought just about any stock market sector near the climax of the panic selling have since been able to make big gains. But valuations are now becoming stretched while the earnings picture for most companies remains shaky.
Perhaps equities will be able to ride the rising tide of liquidity provided by the Federal Reserve to still higher heights. But Michael Howell, the CEO of Crossborder Capital, urged CNBC International viewers to consider diversifying into gold.