Far East Capital Newsletter
Gold keeps getting better
22 Feb 2020

In This Issue

Gold keeps getting better

Again we have seen the US equity markets surge to new highs and then profit taking has knocked them lower. That is to be expected. Meanwhile, the very strong gold price performance is probably exceeding expectations of many market observers just now. Since Christmas the US$ gold price has improved by 9.7%. The weakness in the A$ means that is it performing even better for Australian gold producers. Gold keeps getting better, and the probability is that the recent movements will be sucking more players into the game.

It is difficult to suggest that the Mexican beer virus is responsible for the recent movements in the gold price. There have been reports of disruptions to the supply chain out of China, but why should this affect the gold price? One argument is that the consequential slow down in economic activity will cause central banks (principally China) to pump liquidity into the system, which will lower interest rates and make gold more attractive. Maybe there is some merit in this view, but does it justify a 10% movement in the price? Whatever the reason, it would be a brave man to short gold right now.

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