AGE Daily Gold Update

AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

8/4/2020: Gold blows by $2,000 an ounce

Source: Bill Musgrave, American Gold Exchange

Austin — Gold surged another 1.7% to close at 2,021, a new record high, as hopes for further fiscal stimulus and concerns about covid resurgence pressured bond yields, lifting demand for alternative stores of value. It was the first time in history the metal closed above $2,000 an ounce.

Congress appears to be making progress toward another major stimulus package after leaders from both parties said stalled talks have become "productive." House Democrats are pushing for a $3 trillion aid program while Senate Republicans are pitching a much smaller package of around $1 trillion.

The Treasury Department said yesterday that it expects to borrow another $2 trillion to finance the next aid package through Q3 and Q4 of this year. These figures, based on the $1 trillion Republican plan, are likely to rise with the cost of the final bill.

Gold has surged more than 30% this year as governments have flooded the global economy with cash though fiscal stimulus and monetary easing to combat covid-induced recessions. While necessary, these actions have increased the risk of currency debasement and long-term inflation, both of which are reasons why investors have historically turned to gold.

Additional stimulus and deeper deficit spending should support even higher gold prices in coming months. This week, Goldman Sachs raised its 12-month gold forecast to $2,300. Bank of America is projecting gold at $3,000 an ounce within 18 months.

Treasury yields fell again as investors worry that the US economic recovery will take longer than expected, pushing real yields—or yields adjusted for inflation—further into the negative. Because gold offers no yield of its own but tends to rise with inflation, negative real yields make it more attractive because they eliminate the opportunity cost for holding it instead of bonds.

The other precious metals also rose sharply, with silver jumping 6.6% while platinum and palladium added 2.6% and 1.5%, respectively.

At the Comex close: December gold surged $34.70 to $2,021; September silver jumped $1.61 to $26.03; October platinum picked up $24.10 to $955.20; and September palladium climbed $31.10 to $2,170.60 an ounce.