GOLD – Friday, January 4, 2019 – Gold, in bullish fashion, made a charge at the $1300 mark in Asian trading overnight. Unable to keep the momentum, it retreated quietly during European trading and then tumbled in New York on the release of this morning's surprisingly strong jobs report. It is now down $17 at $1278 – a wholly unpleasant end to what up until now had been a fairly good start to the year. Silver kept its composure through it all and is now down a modest 13¢ at $15.61.
Given the fact that gold's problems this morning have not spread to other sectors, this morning's sell-off could turn out to be a temporary affair. Oil is up sharply again. Commodities in general look firm. The yen is down but not dramatically so. Meanwhile, the global economy itself is still in dangerous waters despite the feel-good jobs number. Perhaps we would be well-served to see how it all plays out before casting judgement. . . . . . . .
Gold, after all is said and done, is roughly level on the week and still up over 4.5% since December 1.
Quote of the Day “Problems are likely to continue in emerging markets, compounded by rising interest rates and the US Fed’s monetary policy which has drained global dollar liquidity. We have already seen the impact on the Turkish and Argentinian currencies. We remain concerned about geo-political problems including Brexit, North Korea and the Middle East, at a time when populism is spreading globally. The resolution of these problems in this unpredictable era will surely be difficult. In 9/11 and in the 2008 financial crisis, the powers of the world worked together with a common approach. Co-operation today is proving much more difficult. This puts at risk the post-war economic and security order. In the circumstances our policy is to maintain our limited exposure to quoted equities and to enter into new commitments with great caution.” – Lord Jacob Rothschild, RIT Capital Partners, Half-Yearly Financial Report, June 30, 2018
Chart note: When the United States abandoned the gold standard in 1971 and freed currencies to float against one another, the fiat money era began. We are still in that era today. This chart shows the performance of gold from the early 1900s to 1971 when gold backed the dollar, and the era from 1971 to present when it did not. Gold has had its ups and down since 1971, but clearly, over the long run, in the absence of an official gold standard, individual investors have been well-served by putting themselves on a private gold standard.
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