Gold is still the safe haven to own

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(Kitco News) – A few weeks ago, we noticed that when gold shines brightest, when the chips are down, and once again, the precious metal proved to be a safe haven.

It’s interesting to compare gold’s response to the latest COVID-19 news, as the price jumped off a nearly three-week low, with Bitcoin falling more than 7% on Friday and falling below $ 55,000 per share. token.

Fears of a new COVID-19 variant are causing the recent panic sale of risk assets. Although little is still known about the new variant out of South Africa, there are fears that global economic activity will be curtailed as governments implement new lockdown measures to stop the spread of this new version of COIVD-19. . We have already seen countries around the world, including Canada, impose travel bans on South Africans and six of its neighbors.

Not only are economists concerned about a declining global economy, but any new shutdown measures will add further problems to the current supply disruptions. In other words, there is an increasing risk of stagflation.

Although gold appears to be well supported in the new environment with the unknown COIVD-19 risks, the precious metal still has a lot of damage to repair after Monday’s and Tuesday’s massive sale.



Personally, I did not really understand why gold fell back to below $ 1,800 per ounce after Joe Biden announced he would nominate Jerome Powell to remain chairman of the Federal Reserve. Yes, perhaps Powell would not be as pigeon-like as Lael Brainard, the other person under consideration; however, Powell is not a screaming hawk.

With inflation rising, it is not surprising that the Federal Reserve is seeking to tighten monetary policy slightly before the end of next year. The pace of downsizing could also be increased, but it still does not change the current environment.

This week I had the opportunity to speak with Jeff Weniger, Head of Stock Strategy at WisdomTree, and he made an interesting observation. No matter how much the Federal Reserve tightens, they will undoubtedly remain behind the inflation curve, which means that real interest rates will remain low, a positive environment for gold.

For now, we will continue to wait and see how the new COVID-19 threat plays out, but it is clear that central banks around the world will not shake the boat if the economy is in danger.

Have a great weekend, and to all our American readers, I hope you had a wonderful Thanksgiving weekend.

Disclaimer: The views expressed in this article are those of the author and may not reflect them Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. or the author guarantees such accuracy. This article is for informational purposes only. It is not an invitation to make any exchanges of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept liability for losses and / or damages arising from the use of this publication.

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