Month: February 2020

FXStreet/Chuck Butler/2-24-2020

“This is a ‘global flight to Gold and Treasuries’ folks… and you will notice that I didn’t mention stocks… To me, the stock phenomenon has run its course, Yes, there are famous analysts out there that will tell you that as long as the Fed has the stock markets’ back then everything will be seashells and balloons… But…. I disagree with them, this virus thing seems to be the black swan that has been hovering over the markets and economies like the Sword of Damocles for years, has finally swam into our lake…”

USAGOLD note:  A good read from Chuck Butler. . . .The flight has been going on for some time, but the ‘black swan’ that’s landed on ‘our lake’ is something new.

Clive Maund/2-23-2020

“Even though gold’s progress in the recent past has been measured and modest it has actually done well – it took its time because it was chewing its way through the considerable resistance arising from the 2011 – 2013 top area. It still is and will be until it gets to the 2011 highs in the $1850 area. However, as mentioned above the now near vertical ascent on the right side of the Bowl on Larry’s chart [not shown please visit link] means that gold is likely to be propelled to new highs with alacrity. It is very important at this time not to get too hung up on gold’s performance against the dollar, which can be misleading and lead to missed opportunity. For the fact is that gold has been romping ahead against most currencies, making new highs in many of them.”

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A recent newsletter noted that there has not been a “Black Swan” in a while, a “Black Swan” being an event that comes as a surprise and has a major effect on mankind’s affairs.  The coronavirus, now named COVID-19, just rendered that observation invalid.

In reaction to the spread of COVID-19, over the last four days the Dow Industrials dropped some 2,300 points while gold climbed $96.  Since May 2019, gold is up $375.  Is stock selling and gold buying because investors foresaw the impact that the virus will have on global trade with many Asian factories shutting down?

Or, is it because COVID-19 cases have spread beyond China and threatens to be another 1918 influenza pandemic that infected 500 million people, then about 27% of the world’s population?  The death toll is estimated to have been 40 to 50 million.

According to the latest World Health Organization (WHO) statistics, globally 79,331 cases have been confirmed, with 2,595 deaths.  China has most of the infections and deaths, 77,262 and 2,572 respectively.  Outside China, 2,069 infections with 23 deaths.  Infections have now been reported in 29 countries.

Here’s hoping that COVID-19 will be contained.  Regardless of the reasons for stock selling and gold buying, COVID-19 is having an impact.

For months, many analysts have been warning that the stock market is in a bubble, which here means an economic cycle characterized by the rapid escalation of asset prices, which are often followed by a contraction. It is created by a surge in asset prices unwarranted by the fundamentals of the asset and driven by exuberant market behavior.  Bubbles are often incited by central bank printing.

I will not disagree that stocks have been in a bubble.  The question is, “Has it popped?”

Still, gold and silver seem reasonable priced, with maybe a little downside risk at current levels.  However, if a global recession sets in and the world’s central banks think that they are going to reverse it by massive money creation, gold and silver are really reasonably priced.