Gold eked out a new 3-week high in overseas trading, but gains could not be sustained as trade deal optimism swung yet again to the positive. The yellow metal left the 100-day moving average and the 38.2% retracement level of the decline off the September high – 1486.58 and 1488.19 respectively – well protected.

At this point, downticks back within the range have been pretty limited and gold remains higher on the week, but clearly still within a corrective phase of the longer-term uptrend. 

Spot Gold Weekly Chart

Spot Gold Weekly Chart

Sadly it seems that a trade deal is the only thing the market is focused on. In reality though, there are plenty of bullish fundamentals underpinning the market.

Central bank gold demand – associated to a large degree with reserve diversification away from the dollar and U.S. Treasuries – is one pretty significant factor. And as Mark O'Bryn of GoldCore pointed out in a blog post, repatriation and movement of bullion to safer jurisdictions are also evidence of a burgeoning new "global gold rush."

The continuation of easy global monetary policy highlighted recently by three Fed rate cuts is another at the top of the list. Meanwhile, the pile of global debt with a negative yield continues to grow and is approaching $20 trillion!

That means investors who hold that debt to maturity are guaranteed a loss. Many of course own this debt in anticipation of further weakness in yields (increases in bond prices). This is reflective of a global flight to safety; and of course, gold is arguably to the safest of the safe-haven assets.

Total global debt surged $7.5 trillion in H1 2019 to a new record in excess of $250 trillion. The global debt to GDP ratio is now around 320%!

Stunningly, the conversion in capitols the world over is that the answer to the staggering pile of debt is more debt, as proponents of Modern Monetary Theory (MMT) gain traction with politicians reluctant to initiate meaningful fiscal reforms.

The U.S. budget deficit for 2019 surged 26% to $984 billion, the highest in seven years. The deficit is expected to reach $1 trillion in fiscal year 2020.

This has driven the U.S. national debt over $23 trillion. Factor in various unfunded government mandates and the reality is more than 3 times that number, even as numerous presidential candidates pledge more "free stuff."

Where does it all end? I fear it ends in another financial crisis; one bigger and badder than the last.

While many clearly learned nothing over the past decade, there are a few of us that have continued stacking physical gold and silver in anticipation of the next day of reckoning.


Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.