In fact, today’s dramatic gains occurred despite the strength of the US dollar. The US dollar has been in free fall since mid-March, when the dollar index traded at 103. The virtual collapse of the US dollar has devalued the currency by 10% over the past 4.5 months.
Spot gold gained $ 18.90 today, closing at $ 1976.10. According to the KGX (Kitco Gold Index), traders and investors bought gold at such a feverish pace today that without the strength of the dollar, the day’s net change would have been $ 28.10 instead. from $ 0.10 under $ 19.00. The strength of the dollar represented a negative gain of $ 9.20 today.
Gold wasn’t the only one in terms of huge gains this week, silver futures opened Monday at $ 22.95 and, after trading at an intra-weekly high of 26, $ 24, closed at $ 24.63, a net gain of 5.43% on the day. Considering silver traded from $ 18.60 to $ 24.63 in July, we saw a 25% rise in silver futures. The last time silver has gained such a huge percentage in a single month was in August 2011. It is the second largest monthly gain on record for silver. Even though it is trading at around half the value of its all-time highs, silver’s upside performance this month has been epic.
The precious metals complex has gained enormously with the fall of the US dollar and the Federal Reserve is continuing its extremely accommodating monetary policy of quantitative easing, leaving its “Fed Funds” interest rate close to zero.
At the conclusion of this month’s FOMC meeting, President Jerome Powell made it clear that the Federal Reserve will do everything in its power to help stop the rate at which the economy is contracting. The Fed has pledged to continue adding mortgage-backed securities, treasury bills and US corporate bonds to its balance sheet to the tune of $ 120 billion per month.
As reported by Reuters on Wednesday, “The surge in US coronavirus cases is starting to weigh on economic activity, the head of the US Federal Reserve said on Wednesday, and he pledged that the US central bank” will do what we can, and as long. as it should, “to limit damage and stimulate growth.” ”
However, the massive action of the Federal Reserve could not stop the biggest contraction in GDP in US history. Data this week revealed that GDP contracted by almost 33% in the last quarter, the largest contraction in gross national product in history.
While we recognize that the current COVID-19 pandemic at some point will run its course and end, the economic fallout that follows will be a stark reminder of the enormous loss of life and economic hardship that many people face around the world. for years if not decades to come.
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