Gold in Q3: Record Highs, Now Consolidating and Coiling Jeff Clark, Senior Analyst, GoldSilver.com
OCT 5, 2020
It’s time for our quarterly report on gold, something we like to do because it helps investors track the industry, as well as keep us focused on the bigger picture and not daily gyrations. Here’s an examination of gold’s performance during the third quarter of 2020, along with its year-to-date performance vs. other major assets. I’ll also highlight the potential catalysts that show the price is not just consolidating, but coiling…
Gold Hits a New Record High
Gold made history last quarter, pushing to a new all-time high. With growing Covid-19 cases, continued flood of Fed liquidity, and geopolitical conflicts that never seem to end, gold demand pushed the price into record territory.
Gold hit $2,066.90 per ounce on August 6, a new record high close, eclipsing the previous record close of $1,904.98 set in August 2011. The gold price then eased off and has since been consolidating.
Gold ended the quarter up 6.7%, but silver took home the prize.
Q3 Performance of Major Asset Classes
The falling US dollar helped gold and silver advance. But the yellow metal set yet another record: it was gold’s eighth straight quarterly gain.
Silver also had a strong surge into early August, closing at $28.93 on August 6. However, it remains 42% below its all-time high of $50 in 1980, showing the greater opportunity still remains with silver.
Investment demand for gold was still high, and in some segments it surged. We avoid paper gold products, but it’s worth pointing out that GLD (SPDR Gold Shares ETF) saw its biggest one-day influx this year on September 21, adding a 1.2 million ounces. On a day gold fell by almost 2%.
You’ll see that the 10-year Treasury offered zero return, and a negative return on a real basis.
Year-to-Date Performance
Gold and silver remain asset leaders for 2020.
2020 Performance of Major Asset Classes
Of the primary investment classes, silver leads the pack. It’s even outgained the tech-darling Nasdaq.
The US dollar fell into negative territory for the year, along with the Dow, real estate, and oil.
With silver’s outperformance of gold in Q3, the gold/silver ratio (gold price divided by silver price) fell to 79.5, from 99 at the end of Q2. The historical average since the 1970s is around 50, so despite the recent decline the current ratio suggests silver is still undervalued relative to gold.
Gold & Silver Outlook: Building for Another Run
While gold and silver were up for the quarter, both eased off their August highs and have since been consolidating. Another way to look at it is this: they’re coiling for another big run.
How do we know there will be “another big run”? Perhaps the most important factor when looking at where the gold price might be headed is that there’s not just one issue that could ignite it; uncertainty persists in most segments of society. Despite a Fed- fueled surge in stock markets and stimulus amounts that could reach to the moon and back, the degree of unease in many areas of society simply isn’t going away.
In fact, it’s hard to look at the horizon and not see numerous risks —and thus numerous catalysts—for gold and silver in both the short and long-term…
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Poster Comment:
Charts at source.