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Gold Hits Highest Level in Over a Year

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Gold hit its highest price in over a year Friday, breaking through the $1,350 barrier.

Friday morning, the spot price of gold was over $1,352, its strongest level since Aug. 2016. The yellow metal was up 2% on the week and was set for its third consecutive weekly gain.

A number of factors continue to drive the price of gold higher.

Most obviously, people are buying gold as a safe haven. In the short-term, economists are concerned about the impacts of Hurricanes Irma and Harvey. And tensions between the US and North Korea remain high. OCBC analyst Barnabas Gan told Reuters both of these factors are driving investors into safe havens.

Looking at the hurricanes, the damage is expected to be huge and because of that safe-haven flows into gold, the Japanese yen and Treasuries have been seen of late. The very strong yellow metal price is due to safe-haven flows. Some of the gold-strength is very much due to the ongoing North Korean tensions as well. The risk for intensified conflicts is there.”

But as Peter Schiff pointed out in an interview on RT’s Boom Bust, Gold’s rise isn’t all about safe haven – at least not yet.

You know, if people are really concerned, if there were geopolitical fears out there, the stock markets would be falling. But they’re not. The stock markets are rising. So, people are not buying gold because they need a safe haven, at least not from a geopolitical event. I think they’re buying gold to get out of the US dollar.”

Indeed, the dollar index was down 0.5% at 91.177 against a basket of six major currencies on Friday, after earlier touching its lowest since January 2015.

Some disappointing economic news also helped boost gold, including weaker than expected jobs numbers.

“Gold prices rallied as weaker-than-expected economic data provided some doubt as to the next rate hike by the Federal Reserve,” ANZ analyst Daniel Hynes wrote in a note.

This dovetails with Peter’s point in the RT interview. The dollar surged on post-election optimism, but monetary policy is now driving the dollar lower, and this is only going to accelerate.

I think the dollar had a substantial rise based on the expectation that the Fed would be able to normalize interest rates and unwind its massive balance sheet. And the general belief that the Fed’s experiment had actually succeeded, and that the economy was in better shape as a result. And so the dollar kind of rode that rally, and now I think it’s starting to surrender those ill-gotten gains.”

Debt is another factor to consider. This week, Pres. Trump and congressional leaders came up with a deal to raise the debt-ceiling and fund relief efforts for Hurricane Harvey. This reiterates something we all know deep down – the political class has no stomach to address the looming debt bubble. In fact, it seems to be doubling down on policies to blow it up even further. In a recent article at Seeking Alpha, analyst Tim Paul summarizes how government policy will undoubtedly push the debt even higher.

There is a natural tendency to ignore problems that seem unsolvable. $19,808,772,000,000 is the total US Public Debt -per the US Treasury Department. That is 19 trillion dollars plus and rapidly approaching 20 trillion. It is troubling to conceive how we continue to pay on this debt, when the value of the dollar is declining. Compounding our debt problem-is that the White House is advocating for a large reduction in tax rates with the hope that economic growth will ramp up close to 4%. I believe that tax cuts are needed, but the implementation will lead to larger deficits and more borrowing and debt in the short to medium term.”

As Paul points out, central bank policies have distorted capital markets by manipulating economic conditions through the purchase and creation of huge amounts of dollar debts while simultaneously holding very low interest rates.

In March I predicted that we might see further dollar weakness, due to the policies of economic distortion. At that date gold was priced at $1,200 per ounce, so we have seen a 12% rise in price. Gold is money, and tends to increase in value as people see that paper currencies are being devalued.”

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
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