On the heels of President Biden’s speech about booster shots, gold steadied Wednesday as the U.S. dollar took a hit. Recent strength in the dollar helped push the spot gold price below $1,800, but virus jitters have buoyed the yellow metal, which currently sits at $1,788.75. Gold futures are up 0.4% as well.
“Gold is certainly benefiting from its safe haven status this morning. While equity markets are falling heavily, gold is back in demand. Clearly COVID nerves are coming through,” OANDA analyst Craig Erlam said in an interview with Yahoo! Finance. “A move above $1,800 looks more achievable. In the medium-term, downside pressure will remain on gold but that won’t stop it reaping the benefits of the jitters.”
Gold’s unique history as a universally agreed upon store of value makes it a beacon to many in times of uncertainty. As a result, it often competes with the dollar. When one shows strength, the other struggles.
While moderating a look back on the Nixon policy that decoupled the dollar from gold, Stephanie Pomboy said that: “The 50 year anniversary of the Nixon shock carries resonance today. We find ourselves transported to a bizarro world where the Fed’s balance sheet has mushroomed to almost half the GDP. Fiscal policy makers are making multi-trillion dollar stimulus bills seemingly on the daily and inflation is back to levels we haven’t seen since we were all sporting bell bottoms.”
Recent studies from the University of Oxford are showing that vaccines are less effective against the spreading delta variant. With news about lockdowns being reconsidered in Israel, the financial markets face broad challenges. In moments of profound uncertainty, it is wise to be bullish on gold. In the 1970s, after Nixon imposed fiat currency and ended Bretton Woods, gold and gold miners flourished.
Investors can get exposure to gold through the Sprott Physical Gold Trust (PHYS), which holds gold bullion. Sprott also offers two actively managed precious metals mining ETFs: the Sprott Gold Miners ETF (SGDM), which tracks gold majors, and the Sprott Junior Gold Miners ETF (SGDJ), which tracks junior gold miners.
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