Gold’s Momentous Rally From 2000 Compared To SPY & QQQ – Part I

We have illustrated the longer-term cycle patterns that originated from an anchor point in 2000 and the real appreciation in Gold compared to other assets.

Chris Vermeulen

Chris Vermeulen

12 hours ago (Nov 13, 2020 05:34 PM GMT)

Gold

My research team and I went off on a wild tangent trying to identify how the markets could react to the recent spike in price activity on Monday, November 9, 2020. This is the day that Pfizer announced a 90% effective rate with its new COVID-19 vaccine, causing the US stock market to skyrocket higher before the opening bell in New York. As with most pop-and-drops, this incredible upside spike trailed lower for the remainder of the trading day. My research team was curious if this type of setup presented any real future outcome or trends. To this end, we focused on the QQQ and the SPY in relationship to Gold.

9 to 9.5 year Gold Depreciation Cycle Ended in 2018 – what’s next?

Gold has been and continues to be a store of value for many around the world. At some times in history, Gold becomes undervalued in comparison to other assets (like stocks, real estate, and other tangible assets). At other times, Gold becomes more highly valued in comparison to other assets. This cycle has taken place throughout hundreds of years of history, and is rooted in the changing perceptions of market participants regarding “what/where is true value in the markets”.

When other assets are skyrocketing higher, Gold is out of favor in terms of real demand. It may still be moving higher in value, but as long as other assets seem to be increasing in value faster than Gold, demand for Gold will diminish. When most other assets enter a time of great concern or devaluation, Gold and Precious Metals usually begin to see stronger demand as the ratio between Gold prices and more traditional investment assets may be near extremes.

Many precious metals investors rely on the Gold to Silver ratio to measure how fast or slow Gold is appreciating or depreciating compared to Silver. This ratio can often be used to help pinpoint disparities between real price valuation levels. In our example, today, we’re using the ratio of the QQQ and SPY to Gold, which asseses more traditional investment asset values in comparison to Gold.

The first Monthly QQQ 2000 Anchor to Gold chart, below, attempts to highlight the past and current ratio levels based on an anchor price level starting on January 1, 2000. The purpose of this ratio chart is to understand how the price advance in the QQQ over time relates to the price advance in Gold. The higher the BLUE ratio level, the more valued QQQ is compared to Gold.

The first thing that caught our attention was the very high valuation levels in early 2000. This suggests that Gold was completely ignored in the late stages of the DOT COM rally when technology and other assets were flying high. As the DOT COM bubble burst, one would expect the ratio to decline over time. However, in this case, the ratio continued to decline over a 9 to 9.5 year period – reaching a low point in 2009 (the Global Financial Crisis lows). This downward trend in the QQQ to Gold 2000 anchor ratio suggests that while the QQQ rotated up and down in a broad sideways trend, Gold continued to appreciate in value. Throughout this time, from 2000 to 2009, Gold rallied over 215% (from $289.50 to over $931.00). This appreciation in Gold translated into the declines in the QQQ to Gold ratio on this chart above.

It was only after 2013 that the QQQ to Gold 2000 anchor chart began to rise again. Interestingly, this really began to take place after the 2011 peak in Gold prices (near $1923.70) and after the US economy really began a more organic growth phase prompted by multiple US Fed QE efforts. We can see from the chart below that the current peak levels (near 0.60) on this ratio chart are still well below the 1.60 ratio levels from 2000. Although this may appear to be a weaker ratio trend, remember this chart anchors everything to January 1, 2000 price points. So this chart reflects the QQQ to Gold ratio based on the origination ratio that existed on January 1, 2000.

COMPARISON OF QQQ, SPY AGAINST GOLD

This next ratio chart below shows the incredible rally in Gold compared to the QQQ and the SPY since the 2000 anchor point. It is important to understand that these ratios are based on the January 1, 2000 anchor price level and represent the comparative price appreciation/depreciation of these assets from that anchor point.

You can see that the QQQ and SPY were both well under the 1.0 ratio level for much of 2001 through 2013. This suggests that these assets failed to rally above the 2000 anchor price level throughout this time. Gold also experienced a brief decline in price below the 1.0 level in early 2000 through 2003, but it quickly started rallying after that point and has continued to extend higher recently.

When we compare the chart below to the one above, we can see that the rally in gold has extended quite a bit further than the rally in the QQQ and the SPY since 2000. Yet, this brings up an interesting question related to the cycles our research team has identified. Have we reached a peak level in the QQQ and SPY in relationship to the appreciation of Gold? Are we entering a new cycle where Gold will continue to appreciate higher compared to the QQQ and the SPY – attempting to recreate a nromalized ratio?

If our research team’s interpretation of this data is correct, the rally in Gold since the 2000 anchor point suggests a new momentum base has established in Gold after the 2011 peak price levels. This new momentum base, if our cycle research is accurate, suggests a broad market peak in equity/stock assets is setting up another 9 to 9.5 year precious metals appreciation cycle that started near 2019. This could be an incredible opportunity for skilled technical traders over the next 8+ years if we understand what to expect based on these cycles/trends.

In this first part of our two-part Gold series this weekend, we have illustrated the longer-term cycle patterns that originated from an anchor point in 2000 and the real appreciation in Gold compared to other assets. In Part II, we will share incredible new information that suggests we are near another 2000-like peak in equities/stocks, suggesting another broad metals rally is just starting and may last another 8+ years.

This does not mean that stocks will collapse or some external event won’t destroy the stock market valuations or the thesis presented. We are merely suggesting that Metals have established a base level (near 2015) while traders have focused on the equities/stocks recently and ignored metals. This rally in stocks/equities suggests that metals have under-appreciated compared to stocks/equities. This disparity in price valuations also suggests that either metals will rally to attempt to close the price disparity or that equities will decline or trade sideways while metals attempt to close the gap.

Overall, this is an incredible longer-term cycle setup that traders must keep in focus over the next few years. If this type of cycle repeats like it did after 2000, then Gold may be trading above $5500 per ounce within the next 2 to 3 years and may peak at levels above $10,000 before the peak is reached.

Learn how my team and I can help you find and execute better trades. We can help grow your trading account with our Swing Trading service, and also protect your investment account with our long-term market signals service. Visit www.TheTechnicalTraders.com today to earn more. If you trade options or are looking to learn more about options trading then please click here to sign up for information on the upcoming launch of our new options courses and our new options signals newsletter service.

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen

Chief Market Strategist

Kinesis Money

David

Gold holds steady as virus wave offsets vaccine hopes

Nov 13 (Reuters) – Gold prices were little changed on Friday, as fears of an economic impact due to a surge in global cases of COVID-19 countered optimism from the developments in a potential vaccine.

FUNDAMENTALS

* Spot gold was steady at $1,876.92 per ounce by 0044 GMT. It was headed for its worst weekly performance since late-September, declining 3.8% so far.

* U.S. gold futures were up 0.1% at $1,874.50.

* The dollar index held steady but was on track for a 0.7% weekly gain.

* The heads of the Federal Reserve and the European Central Bank welcomed the encouraging results in trials of a vaccine candidate for COVID-19 but stressed that the economic outlook will remain uncertain.

* The number of Americans filing new claims for unemployment benefits fell to a seven-month low last week, but the pace of decline has slowed and further improvement could be limited by higher infections and lack of additional fiscal stimulus.

* Top Democrats in U.S. Congress urged renewed negotiations over a multitrillion-dollar coronavirus aid proposal, but a top Republican immediately rejected their approach as too expensive.

* European officials warned against COVID-19 complacency and said measures to control a surge in infections must continue.

* More than a dozen U.S. states have doubled their COVID-19 case loads in the last 14 days, compared with the previous two-week period, while the global tally has crossed 52.45 million.

* The London Bullion Market Association is threatening to stop bullion from countries including the United Arab Emirates entering the mainstream market if they fail to meet regulatory standards, a letter seen by Reuters showed.

* Silver rose 0.1% to $24.26 per ounce. Platinum was steady at $879.26, while palladium was 0.2% higher at $2,334.99.

DATA/EVENTS (GMT) 1000 EU GDP Flash Estimate QQ, YY Q3 1500 US U Mich Sentiment Prelim Nov

(Reporting by Eileen Soreng in Bengaluru; editing by Uttaresh.V)

8780, Outside U.S. +91 80 6749 6131; Reuters Messaging: eileen.soreng.thomsonreuters.com@reuter

Nov 13 (Reuters) – Gold prices were little changed on Friday, as fears of an economic impact due to a surge in global cases of COVID-19 countered optimism from the developments in a potential vaccine.

Spot gold was steady at $1,876.92 per ounce by 0044 GMT. It was headed for its worst weekly performance since late-September, declining 3.8% so far.

U.S. gold futures were up 0.1% at $1,874.50.

The dollar index held steady but was on track for a 0.7% weekly gain.

The heads of the Federal Reserve and the European Central Bank welcomed the encouraging results in trials of a vaccine candidate for COVID-19 but stressed that the economic outlook will remain uncertain.

The London Bullion Market Association is threatening to stop bullion from countries including the United Arab Emirates entering the mainstream market if they fail to meet regulatory standards, a letter seen by Reuters showed.

Silver rose 0.1% to $24.26 per ounce. Platinum was steady at $879.26, while palladium was 0.2% higher at $2,334.99.

(Reporting by Eileen Soreng in Bengaluru; editing by Uttaresh.V) </p> 8780, Outside U.S. +91 80 6749 6131; Reuters Messaging: eileen.soreng.thomsonreuters.com@reuters.net))

 

Kinesis Money

David

Gold continues to drift lower, as traders favor risk-on assets and dollar strength

Gold futures continued to drift lower, continuing the sharp decline that traders witnessed on Monday of this week. Although yesterday gold was able to recover slightly gaining $18 off of Monday sharp selloff, today traders took gold pricing back to erase those advances made on Tuesday. As of 4:55 PM EST, the most active December contract is currently fixed at $1863.50 which is a net decline of $12.90 on the day. Considering that gold futures opened at $1956 on Monday, the cumulative damage over the last three days have been almost $100 decline per ounce.

A combination of strong U.S. equities (risk-on) performance, dollar strength, and modestly higher bond yields have all dampened the bullish market sentiment in the precious metals. Ever since the first week of August when gold futures reached a new record high price at $2088, gold prices have been steadily forming a series of lower highs and occasional lower lows.

The only upside spike since the record high was reached occurred on Monday, November 9, when market forces took gold futures briefly above $1960 per ounce. That price could not be sustained even for a day as market participants aggressively sold gold and silver after Pfizer pharmaceutical announced that they had completed their stage III trials with a 90% efficacy rate.

The announcement took gold $110 lower from the highs achieved to close near the absolute bottom of the range at $1854. The last time gold closed at that particular price point ($1854) occurred on the week of September 5, 2011. Gold it hit its former record high of $1920 roughly 2 weeks before that. The similarity is eerily foreboding to recent action.

Our technical studies indicate that there is strong support for gold at the 38.2% Fibonacci retracement level which occurs at $1844. This retracement uses a data set that begins in the middle of March when gold traded to a low of $1415 up to the new record high which occurred during the first week of August at $2088. Our technical studies also indicate that there is a decent probability that the lows of $1850 will hold and continue to be a major support. However, a break below that price point could take gold to as low as $1768 per ounce which is the 50% retracement from the same data set.

Major resistance continues to be found at the 23.6% retracement level which occurs at $1937. With minor resistance at the 50-day moving average at $1913 and the 100-day moving average which occurs at $1906.

Until some news emerges that clarifies when and how much Fiscal stimulus will be allocated, we could see gold trade in a range between the support and resistance level mentioned above.
 

Wishing you as always, good trading,
 

By Gary Wagner

Contributing to kitco.com

Kinesis Money

David

Economy to shut down again this winter, says Lobo Tiggre, investor who called gold price drop

"If Biden is sworn in, he'll shut the economy down this winter more than Trump would have. USD goes under the bus, stagflation is likely. They'll blame COVID-19, but for once, socialism might also get some of the blame for the trouble it causes…" said Lobo Tiggre of the Independent Speculator in a Tweet made last week.

Several countries in Europe are already going back into national lockdown, and Tiggre said that like last time, the U.S. is likely to follow Europe’s lead.

“That’s what happened last time too. It started first in Europe, and then it came to the U.S. There might be political will in the U.S. to be more resistant to it,” he said.

Tiggre added that shutdowns are likely to happen under either Joe Biden or Donald Trump, but Biden’s policies are stricter.

“[Biden] gave a speech about what he was going to do about COVID-19 and he talked about national shutdowns, national mask mandates,” he said. “On the national level he could order federal employees to do things that would make non-compliance with his national mandate or national plan very difficult for local communities, even strongly Republican ones.”

Pfizer’s announcement this week that the company has produced a vaccine that’s 90% effective is unlikely going to prevent lockdowns.

“It’s a vaccine that needs to be kept at minus 80 degrees, needs two doses, isn’t going to be ready in mass numbers until next summer, and winter is coming,” he said.

On gold, Tiggre said that unless the economy avoids shutdowns completely, monetary and fiscal stimulus reverse course and interest rates rise, then it is unlikely that the yellow metal will face serious headwinds soon.

 

By David Lin

For Kitco News

Kinesis Money

David

"I would be surprised if we don’t sell off" – Gareth Soloway shorts stock market

Nothing has fundamentally changed in the economy to warrant a sustained rally in the stock markets, said Gareth Soloway, chief market strategist at InTheMoneyStocks.com, speaking with Kitco News at 3:45 pm EST on Monday.

“I don’t believe anything major has changed. We knew a vaccine was going to come, the projections are still first quarter, early second quarter,” he said. “The same thing with Biden coming into the White House, it doesn’t change a lot of the economics of the market, so it does concern me and I used it to put on shorts today.”

The Dow Jones rallied 800 points in the biggest single day gain in 5 months on Monday following Pfizer's announcement that their COVID-19 vaccine is 90% effective.

Soloway added that while retail traders reacted positively to the news on market open and have been the primary group driving prices higher, institutional investors have been using the opportunity to unload positions and take profits.

“Any time we have a gap up, it’s the institutions gapping that market up. So what’s going on is the small investor got very excited since the open, the Robinghood traders, etc., but the institutions have been selling into it,” he said.

Soloway took profits this morning on big moves in stocks like JP Morgan.

“Any time you get an extended move like this where you’re so short-term overbought, and I’m just talking about the last week and it has been a massive move, you have to think like a shorter trader, because in my mind I’m always thinking to myself, give me a pullback and I’ll re-buy, but I always like to pocket those profits,” he said.

On gold, Soloway said that long-term, the metal can hit $3,000 an ounce in two years’ time.

 

By David Lin

For Kitco News

 

Kinesis Money

David

Gold price holding gains after last week’s breakout

he gold market is starting the week on solid footing with modest gains following last week's nearly 4% rally.

December gold futures last traded at $1,955.40 an ounce, up 0.19% on the day.

Gold's humble gains after the market's Sunday evening open comes as Democratic nominee Joe Biden continues to secure his place as President-elect. Although some states haven't released their official tally from last week's election, Biden has secured enough votes to win the race to the White House, according to media reports.

Although Biden continues to solidify his place in history, garnering the most votes for any U.S. president, many political pundits said the next few weeks will be filled with uncertainty as President Donald Trump is not expected to give up without a fight. He has already initiated lawsuits in various states in an attempt to shift the results.

According to many commodity analysts, two factors will continue to support gold prices. First, a Biden presidency — even with a divided Congress as Republicans look to control the Senate and Democrats hold on to the House — is expected to lead to more stimulus measures. The second factor is that the ongoing political turmoil will boost gold's safe-haven demand.

Both of those factors will also continue to weigh on the U.S. dollar as it hovers near a two-month low. Analysts have said that the U.S. dollar will be essential to gold's future path, higher or lower.

"With recounts and lawsuits, we could be months away from finding out who will be the next president. That I think will weigh on the dollar. Because there is so much uncertainty in the U.S., I think you have to be in gold," said Darin Newsom, president of Darin Newsom

Aside from politics, many analysts also expect economic uncertainty to weigh on the dollar and provide renewed support for gold. This past week has seen new records in COVD-19 infections in the U.S. more than 10 million people across the country have been infected, and health officials said that it will only worsen.

Many analysts and economists said that the pandemic will weigh on economic growth heading into the new year.

Ole Hansen said that with the expected political gridlock on Capitol Hill, markets will start to look to the Fed for more leadership on the economy.

"Any new stimulus measures from the Fed is going to drive gold prices higher," he said. "This seems like the catalyst that could push gold prices to $2,000 an ounce by the end of the year.

Not only do analysts see strong fundamental support for gold, but the market made significant technical moves as prices hold near a six-week high.

Marc Chandler, managing director at Bannockburn Global Forex, said that gold broke above a significant downtrend line; however, he added that gold push back to all-time highs remains allusive.

"[Gold is] not quite off-to-the-races and a rechallenge of $2000. First, it must overcome the $1962 area, which is the halfway mark of the decline from the early August record high and then the (61.8%) retracement near $1989.

Analysts at Murenbeeld & Associates said that the lack of a blue wave in the U.S. election has shifted some bullish expectations for gold prices heading into the new year.

"The election results are not yet set in bedrock, but as it stands, we expect a smaller fiscal package to come than some (possibly even the Fed) had hoped, and we expect increased pressure on the Fed to review further monetary options in the event the economy sputters," the analysts said in the firm's weekly report.

The firm said that it sees gold prices ending the year between $1,960 and $1,980 an ounce.

 

By Neils Christensen

For Kitco News

 

Kinesis Money

David

'A democracy cannot exist as a permanent form of government', so what's next?

world has given way to the rise of populism, mirroring what happened in the 1930s, when after the Great Depression, populist leaders took power and World War 2 followed, said Bob Thompson, portfolio manager of Raymond James. "Sometimes the currency wars, competitive devaluations, etc. turn into real wars," he said. "We're not there yet, I'm not saying that's going to happen, but sometimes that's the case." One of the root problems of the economy is excessive amounts of debt. “You have a long-term credit cycle and that’s a long wave of about 70 years, and credit builds up to the point where excess credit is not helping anymore and that’s kind of where we are. So, at the end of this long-term credit cycle what happens is we get this huge divergence between the wealthy and the poor, exactly what’s going on today,” he said. Towards the end of similar credit cycles where the wealth gap widens and trade wars emerge, populism starts to take center stage in politics, Thompson said. “People like to vote in people who say they have simple solutions to very complex problems and we saw that in the late 1930s,’ he said. Thompson’s comments come as Joe Biden wins the presidency on Saturday, after taking the lead in both Pennsylvania and Nevada. 2020’s election saw the largest voter turnout in U.S. history. Even with a Democratic president in the White House, tensions with China are likely to remain, Thompson said. “I think there’s going to be lots of issues between China and the U.S. going forward because I think both parties have decided that it’s time to get a little tougher on what they perceive to be some issues with China,” he said. “I can see that some geopolitical risks will continue, obviously that helps the gold sector.” One of the reasons governments have maintained an accommodative monetary policy with low interest rates is to create inflation and devalue the debt that they have accumulated, Thompson added. On mining, the sector is currently at “6:30” on the mining clock, which means more mergers and acquisitions are on the way, Thompson said. “What happens is that when M&A comes, it becomes extremely competitive, and companies start to outbid each other,” he said.

By David Lin

For Kitco News

 

Kinesis Money

David

Post-Trump era? Gold price to see $2,000 next week as attention shifts to coronavirus – analysts

The gold market is reaping the benefits of a lower U.S. dollar in an uncertain environment, where markets are betting on a Biden win.

The precious metal began its rally Thursday with prices rising more than $50 amid uncertainty and weaker U.S. dollar as Democratic candidate Joe Biden maintained his lead against U.S. President Donald Trump.

Based on the latest Electoral College count, Biden has 264 votes versus Trump's 214. Ballots from swing states, such as Nevada, Georgia, and Pennsylvania, are still being counted as of Friday afternoon.

At the time of writing, December Comex gold futures were trading at $1,954.80, up 0.41% on the day, seeing their best weekly gains since late-July.

"Gold has been really following the dollar, the COVID-19 crisis, and stimulus talk," Afshin Nabavi, vice president at precious metals trader MKS SA, told Kitco News on Friday. "There was a mixture of safe-haven buying. The dollar has been pretty much in free-fall, which helped the precious on Thursday. Everybody under the sun was interested in the safe-haven."

With all this election uncertainty amid a second coronavirus wave, gold could climb back to the $2,000 an ounce level next week, said Nabavi.

"We are now at around $1,950-55. If we can get above that, I think $2,000 is in the cards," he said. "Economy is in deep trouble around the world because of the pandemic, stimulus packages will keep on printing money, and the precious metal will benefit on the upside."

More litigation news and vote recounts could shake markets next week, Nabavi warned. "I expect a lot of resistance coming from Trump, even if elections are saying the contrary. It could be a bit of a mess, and it will help precious go higher as well."

Gold's $1,980 has been identified as key resistance by TD Securities commodity strategist Daniel Ghali, who sees gold as overbought for the moment.

"The reason behind that is because gold prices outperformed real rates," he told Kitco News on Friday. "The most likely outcome is Biden presidency with Republican Senate, which means less fiscal stimulus and gridlock in the near term."
 

Election expectations

For next week, markets are pricing in a Biden win and a Republican-controlled Senate, which means a split government.

"While not official, Biden is likely to be the next President with 306 electoral votes. Margins are too wide for recounts or litigation to likely reverse that. The Senate seems likely to result in a 52-48 Republican majority, a net gain of just one seat for Democrats. However, the race is likely deadlocked at 50-48 (R/D) pending a Jan 5 runoff in the two seats in GA, which will likely garner huge media, political, and financial attention over the next two months to see if Democrats can win both seats and gain control of the Senate," said TD Securities strategists on Friday.

What this means for policy going forward is less dramatic changes, including a smaller fiscal stimulus. "Divided government should mean fewer significant policy changes, but we expect a small ($500bn) stimulus package to pass in Dec-Jan," TD's strategists added.

The U.S. dollar is likely to continue to lose steam as the year-end approaches, analysts added.

"Markets are confident Biden will win as final votes are counted, and rallying risk assets don't seem too concerned by President Trump's moves to challenge the result," said ING FX strategist Francesco Pesole. "In FX, USD may stay pressured as investors keep betting on a rest of the world rally in the post-Trump era."

In the week ahead, the focus will remain on the U.S. election and Biden's chances of receiving a convincing enough victory. After that, however, the attention will shift to the coronavirus numbers in the U.S., which are seeing a record of more than 100,000 new cases per day, Pesole added.

"Price action over the last week … suggests investors are positioning for a post-Trump era, which, with a Fed keeping rates near zero, is seen as a dollar negative," the strategist added. "The biggest threat … comes through COVID-19. New daily COVID cases in the U.S. are running above 100k per day, which could prompt state governors to close bars and restaurants again – a move that could hit very bullish current sentiment."

Rising coronavirus cases across the world pose "the greatest economic challenge," said CIBC Capital Markets chief economist Avery Shenfeld.

"We've been watching the numbers obsessively. No, not those numbers, as we don't really need to hear from every county clerk in the U.S. When the dust settles on the election, the market will turn its attention again to the coronavirus," he said on Friday.

So far, the macro data out of North America does not show a big impact from the second coronavirus wave. However, Europe might be flashing warning signs, said Shenfeld.

"We can look across the pond to Europe, where even higher caseloads seem very likely to squeeze Q4 GDP, for what could be in store here if we can't contain infection rates," he said. "In projecting economic data during the pandemic, it's important to watch the coronavirus numbers, rather than just the public health edicts. And, unfortunately, in Europe, the U.S. and most of Canada, the case counts have yet to signal an end to the second wave. So while North America's economy looks to have still advanced in October, we're not out of the woods yet."

The looming winter and the surge in coronavirus cases bring up the next point — the need for fiscal stimulus.

Fed Chair Jerome Powell stressed that need on Thursday during a press conference, which followed the monetary policy meeting that kept interest rates unchanged.

Powell reminded that the current economic downturn is the most severe one, and it will take a while to get back to the levels of economic activity seen at the beginning of the year.

"It will require both monetary and fiscal policy to achieve that," he said. "Further support is likely to be needed from fiscal and monetary policies."

Powell also addressed the rising COVID-19 cases, saying that the U.S. is seeing "a widespread spike in cases," noting that "it does seem likely that people who have begun to engage in activities may pull back."

Data to watch

Next week will be a fairly light data week with the critical releases being U.S. inflation data out on Thursday and PPI numbers out on Friday.

Also, markets will continue to watch the U.S. jobless claims, scheduled for release on Thursday.

 

By Anna Golubova

For Kitco News

 

Kinesis Money

David

E.B. Tucker lays out investment 'war' plan as Biden edges closer to White House

With Odds now stacked in Joe Biden's favor, it's now looking more likely that the next four years will see a Democratic president in the White House.

E.B. Tucker, director of Metalla Royalty and "Why Gold? Why Now? The War Against Your Wealth and How to Win It" said that gold and gold royalty stocks still remain the ultimate weapons against the "war against wealth."

Tucker said that bigger government, more government intervention, and low interest rates are all likely to persist during a Biden Administration, creating tailwinds for gold.

Tucker maintains $2,500 an ounce by the end of the year as his gold price target.

 

By David Lin

For Kitco News

 

Kinesis Money

David

Déjà Vu – it's happening again

Okay, so it is not déjà vu. In fact, it’s only slightly reminiscent of the last presidential election held in 2016 in terms of how gold prices changed immediately following the release of the election results. In both cases the immediate reaction and move in gold was the polar opposite of what was expected. In 2016 analysts believed that if Donald Trump got elected gold would reach stratospheric heights due to the uncertainty of the first president to be elected that was not a politician.

The common thread that the last two presidential elections had was a highly exaggerated knee jerk reaction. This caused swift moves taking gold prices higher for the first hour and then lower. Initially when the election results became clear in 2016 and the candidate which was presumed even before the vote to be the first woman president lost the election.

To be fair, the analysts in fact did get it right as immediately after selling off after the election results were made public, gold over the next four years gained roughly 50% in value. Furthermore, the dramatic rise in gold during the Trump administration had a lot to do with the pandemic that hit the United States and the beginning of 2020 causing the Treasury Department to allocate $3 trillion to fund the “cares act “providing the needed fiscal stimulus to help revitalize the U.S. economy.

A Trump victory inherently contained an uncertainty factor. It was believed that this uncertainty would be the underlying cause that would take gold prices sharply higher. And in fact, they did for about an hour immediately following the election taking gold $50 higher for an hour. However, within eight hours gold prices did 180° reversal and closed $50 lower, the exact opposite of the anticipated reaction to a Donald Trump presidency.

The 2020 presidential election had a similar knee-jerk reaction as it became clear that it would not be a landslide victory for the Democratic candidate but rather a close call with Joe Biden winning the election to become the 46th president of the United States.

Like in 2016 it was anticipated that should the election unfold with a democratic winner gold would gain tremendous ground due to the fear of a unprecedented amount of expenditures needed to fund the fiscal stimulus bill. Market sentiment quickly pivoted once it was clear that the Senate would maintain its Republican majority and thereby contain the prospect of another large fiscal aid package that would further swell our record budget deficit for 2020.

Brian Lundin said that, “Speculators had bought gold in recent days on the prospects for a blue wave that would have put both the White House and Congress in the control of the Democrats, and therefore grease the skids for more-massive stimulus spending.”

Seeing as this election is likely to be contested by the Trump team, and that the democrats are the senate minority with the majority held by republicans the rise in gold prices is likely to have the same outcome as in 2016.

 

By Gary Wagner

Contributing to kitco.com
 

Kinesis Money

David