Gold Rallies Toward $1,800 on 'Massive Currency Debasement'
Comment of the Day

April 14 2020

Commentary by Eoin Treacy

Gold Rallies Toward $1,800 on 'Massive Currency Debasement'

This article by Ranjeetha Pakiam for Bloomberg may be of interest. Here is a section:

Overall, gold still has room to run, according to Hans Goetti, founder and chief executive officer of HG Research.

“What’s happening here is that the Fed is expanding its balance sheet and every other central bank in the world is doing the same,” he told Bloomberg TV. “What you’re looking at is massive currency debasement in the long term. That’s the major reason why gold is higher, and I would think that over the next few weeks or months, we’re probably going to retest the high that we saw in 2011.”

The Federal Reserve’s massive U.S. monetary program and the fiscal stimulus “could see long-end rates rise during the recovery phase, but not without rising inflation expectations, which should keep real rates suppressed,” TD Securities analysts said in an emailed note. “In this context, we suspect that investment demand for gold will continue to rise as capital seeks shelter from a long-term environment in which real rates are negative.”

Negative real rates boosts the appeal of non-interest-bearing bullion.

Gold’s latest upswing has come even as risk sentiment received a boost after China’s trade data beat estimates, while the pace of coronavirus infections has slowed in some countries, with the focus shifting toward how lockdowns can be eased. President Donald Trump said he has “total” authority to order states to relax social distancing and reopen their economies.

Eoin Treacy's view

The rationale being used by governments everywhere to justify massive spending programs is “this is not the time to worry about deficits.” The stock market, particularly the FAANG sector continues to rebound on the abundance of free money but the bigger picture is this is being achieved by rapidly debasing the purchasing power of fiat currencies.

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