It is time to look again at a subject which pops up every now and then and this morning has done exactly that. From The Guardian:

The price of gold hit $1,865 per ounce for the first time since September 2011 this morning.

Gold has surged by 20% since the depths of the pandemic, and some analysts reckon it could hit $2,000 for the first time ever.

A weak dollar is good for gold, given its reputation as a safe-haven from inflation and money-printing.

Let us start with the price noting that this is a futures price ( August) as we remind ourselves that there is often quite a gap between futures prices and spot gold these days. That leads to a whole raft of conspiracy theories, but I will confine myself to pointing out that in a world where interest-rates are pretty much zero one reason for the difference is gone. Strictly we should use the US Dollar rate which is of the order of 0.1% or not much.

Actually a rally had been in play before the Covid-19 pandemic as we ended 2019 at US $1535 and the rallied. However like pretty much all financial markets there was a pandemic sell-off peaking on March 19th a date we keep coming back to. My chart notes a low of US $1482. Since then it has not always been up,up and away but for the last 6 weeks or so the only way has indeed been up. Of course there is a danger in looking at a peak highlighted by this from The Stone Roses.

I’m standing alone

I’m watching you all

I’m seeing you sinking

I’m standing alone

You’re weighing the gold

I’m watching you sinking

Fool’s gold

What is driving this?

Weak Dollar

The Guardian highlights this and indeed goes further.

Marketwatch says the the US dollar is getting “punched in the mouth” – having dropped 5.1% in the last quarter.

It’s lost 2.3% just in July so far, partly due to a revival in the euro. And there could be wore to come:

There is some more detail.

The US dollar is taking a pummelling, sending commodity prices rattling higher.

The dollar has sunk to its lowest level since early March, when the coronavirus crisis was sweeping global markets. The selloff has driven the euro to its highest level in 18 months, at $1.1547 this morning.

Sterling has also benefited, hitting $1.276 last night for the first time in six weeks.