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Gold Breaks All-Time Record!

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Gold broke through $1,900 on Friday morning and kept pushing upward, setting an all-time record during Asian trading hours on Monday.

Gold was trading as high as $1,944 an ounce early Monday.

The previous record price for gold came in the third quarter of 2011 at just over $1,920 an ounce.

Gold’s climb has been steep and fast. It was just a couple of weeks ago that we reported gold breaking through the $1,800 resistance level.

There are a number of factors driving gold higher. There is a strong safe-haven bid with a surge of coronavirus cases in many areas. There are also increasing geopolitical tensions with China. In a speech late last week, Secretary of State Mike Pompeo used rhetoric reminiscent of the Cold War. He depicted China’s leaders as tyrants bent on global hegemony. “If the free world doesn’t change Communist China, Communist China will change us,” he declared. “If we bend the knee now, our children’s children may be at the mercy of the CCP, whose actions are the primary challenge to the free world.”

There also seems to be growing awareness that the promised quick “v-shaped” recovery will never materialize. The economic data just doesn’t support it. We’ve reported on the rise in mortgages delinquencies, the rising number of permanent businesses shutdowns, the number of small business owners who don’t think they’ll survive, the increasing number of over-leveraged zombie companies, and the tsunami of defaults and bankruptcies on the horizon.

Dollar weakness is also helping drive the yellow metal higher. Early Monday, the greenback fell to a four-month low against the yen and a 22-month low against the euro. The dollar index fell to nearly-2-year lows around 94.60 Friday and continued its drop in early trading Monday, falling to 93.82.

After gold broke its all-time record, Peter Schiff put it into a proper perspective.

The US dollar just hit an all-time record low. You now need over $1,920 to buy a single ounce of #gold. But this record won’t last long as the dollar’s decline is only just getting started. It’s about to plunge to new depths taking the American standard of living down with it.”

Peter emphasized this point during an interview with Johnny Bravo last week.  He said it’s not so much that gold is going up, but the dollar is going down.

It’s not just the dollar. It’s fiat currencies around the world that are losing purchasing power as their central banks are conjuring them into existence at a rate that’s far more rapid than the miners are pulling gold out of the ground. Gold’s a good store of value. So is silver.”

Meanwhile, US Treasury yields are in the basement. The yield on the benchmark 10-year Treasury note was at 0.586%. Low bond yields reflect dollar weakness and make gold an even more attractive safe-haven, lowering the opportunity cost of holding the non-yield-bearing metal.

The biggest driver of gold is central bank monetary policy. The Federal Reserve has created trillions of dollars out of thin air and injected them into the economy.  Meanwhile, the US government continues to borrow and spend. As Seeking Alpha put it, “The yellow metal tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.”

In a recent interview, Jim Grant explained why he’s confidently bullish on gold. The Fed’s monetary Hail Mary is distorting the economy.

It means interest rates no longer are prices that reliably direct investment flows and valuations. Interest rates are the artificial constructs of the Fed that is doing its best to step in and make something happen in the absence of economic activity as we used to know it. So, interest rates distort judgments and flows. And the amount of money that the Fed has created is itself a distorting factor.”

Jerome Powell has committed to doing whatever it takes as long as it takes to keep the US economy propped up. That means there is no end in sight to the Fed’s extraordinary monetary policy. That means there is really no ceiling on how high gold could go.

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