The price of gold is up by about 2.7% so far in 2020. But gold stocks are down on the year. Why is this happening and what is this telling us?
When we talk about gold stocks, we’re referring generally to stock in companies involved in gold mining and exploration. The valuation of these stocks as a group typically track with the price of physical gold. When the price of gold is going up, the miners typically follow along.
So, why this recent divergence?
It’s like Dawn of the Dead on Wall Street. Zombies are everywhere.
Even as stocks continue to push to new highs, the number of money-losing companies listed on US stock markets has ballooned to levels not seen since the dot-com bubble of the late 1990s.
According to a recent Wall Street Journal article, nearly 40% of US-listed companies are losing money.
Peter Schiff has been saying the Federal Reserve is going to let the inflation monster loose and this is going to be good for gold. Some people in the mainstream are starting to pick up on this theme.
During a recent interview with the Financial Times, Bridgewater Associates co-chief investment officer Greg Jensen said gold could surge over $2,000 as central banks embrace higher levels of inflation.
Are consumers getting close to the end of their road of debt?
There are some indications that they might be and that’s not good news for an economy built on consumers spending money they don’t have.
Gold had a strong year in 2019 and a World Gold Council report says the outlook for 2020 remains bullish.
We expect that many of the global dynamics seeded over the past few years will remain generally supportive for gold in 2020.”
Gold charted its best year since 2010 last year. The price increased by 18.4% in dollar terms. The yellow metal also reached record highs in every G10 currency except the dollar and the Swiss franc. There were record inflows of metal into gold-backed ETFs and central banks continued to gobble up gold.
The US federal government ran a budget deficit of over $1 trillion in the 2019 calendar year. It was the first budget deficit over $1 trillion in any calendar year since 2012 — in the midst of the Great Recession.
The budget shortfall from January through December totaled $1.02 trillion, according to the latest report issued by the Treasury Department. That continued a rapidly accelerating upward trajectory. The 2019 budget gap was 17.1% bigger than the 2018 deficit, which was a 28.2% increase over 2017.
Net inflows of gold into gold-backed ETFs came in at 400.3 tons in 2019, according to data released by the World Gold Council. ETF gold holdings grew by 14% last year and finished at 2881.2 tons.
Overall, global gold-backed assets under management grew by 37% in US dollars due to positive demand and an 18% increase in the price of gold.
ETF gold-holdings reached a record 2,900 tons in the fourth quarter. The previous record for ETF gold holdings was set back in 2012 when the price of gold was near $1,700 per ounce.
Central banks continued their remarkable gold-buying spree in November and remain on pace to eclipse 2018’s near-record purchases.
According to the latest numbers from the World Gold Council, central banks added 27.9 tons on a net-basis to official gold reserves in November. That brings the yearly total for 2018 with one month left to calculate to 570.2 tons, 11% higher than the same period in the previous year.
We’re told that this is the greatest economy in history. Stock markets are surging. Unemployment is low. And yet despite the good times, a shocking number of Americans live paycheck to paycheck.
Several surveys cited by MarketWatch reveal the precarious financial situation many Americans find themselves in. This is less than ideal in an economy dependent on consumer spending.
The price of silver was up better than 15% in 2019. This has led to a major improvement in investor sentiment toward the white metal, according to a report highlighted in the latest issue of the Silver Institute’s Silver News.
According to the report, silver got a boost from a host of factors, including economic and geopolitical concerns that drove safe-haven investment in precious metals.