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Gold Takes A Dip But Remains Above $1,800

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EDITOR NOTE: The dollar remained steady despite expectations of more Federal Reserve stimulus. In the meantime, gold and silver are rising amid those expectations. Dollar strength will ultimately have to give--no asset that’s diluted can remain fundamentally strong despite being propped up by optimistic (read: unrealistic) sentiment. Gold’s inverse relationship to the dollar doesn’t always move in lockstep. In this case, gold has made the first move. And when the dollar finally buckles under the strain of its dilution, expect the gold uptrend to accelerate sharply. - Gold prices slid Thursday on profit-taking after vaulting to nine-year highs in the previous session. But the safe-haven crowd managed to keep the yellow metal supported at the $1,800 perch as an explosion in new coronavirus cases raised doubts about the U.S. economic recovery.

While the dollar was firmer, gold was propped up on the lower end by expectations of more stimulus for the U.S. economy from the Federal Reserve, which could ultimately debase the currency and prop up alternatives like the precious metal, analysts said.

Gold is “torn between its safe-haven bona fides, which are prompting money managers to sell on risk-on behavior in markets, and its inflation-hedge characteristics, which are driving a swarm of capital to seek refuge in the yellow metal,” TD Securities said in a note on gold. 

“Ultimately, we anticipate that real rates will continue to drive gold prices higher as normalizing inflation expectations and suppressed rates will provide fuel for the trade,” the Canadian bank-backed brokerage said. 

U.S. gold futures for August delivery on Comex settled down $16.80, or 0.9%, at $1,803.80. On Wednesday, it hit $1,829.80, its highest since September 2011, when it scaled to a record $1,911.60.  

Spot gold was down $5.91, or 0.3%, at $1,802.60 by 3:10 PM ET (19:10 GMT). The real-time indicator of bullion prices scaled $1,809.22 earlier in the day, a peak since September 2011, when it hit a record high of $1,920.85.

Data shows that more than 3 million Americans have already been infected by the COVID-19, with a death toll exceeding 134,000. On Wednesday, the United States reported a daily record of more than 60,000 cases. 

Top U.S. pandemics expert Anthony Fauci, speaking on a podcast hosted by the Wall Street Journal, said new COVID-19 cases in the country were seeing “exponential growth.” 

“It went from an average of about 20,000 to 40,000 and 50,000. That’s doubling. If you continue doubling, two times 50 is 100,” Fauci said. “Any state that is having a serious problem, that state should seriously look at shutting down. It’s not for me to say because each state is different.”

Fauci warned recently that the daily case growth could reach 100,000 without proper social-distancing and other safety measures. A new model by the University of Washington also predicts 200,000 U.S. coronavirus deaths by Oct. 1, casting further doubts about economic recovery. 

The U.S. economy shrank 5 percent in the first three months of 2020 for its sharpest decline since the Great Recession of 2008/09, as most of the 50 states went into lockdown to stem the outbreak of the virus. While most businesses have reopened over the past two months, economists still warn of a double-digit recession in the second quarter.

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