Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance, and the factors that affected gold prices.
What Did Gold Do in February?
Gold didn’t have a very good month in February, closing at a second monthly loss in a row. This culminated in a $53 drop in spot gold on the last trading session of the month, hitting $1,716 an ounce before recovering back to $1,730. This puts gold on track for the worst month in four years.
The pain this month wasn’t limited to gold. Treasuries had a major sell-off, and high-flying tech stocks took a beating. This was caused by several things, but it can all be traced back to bets that the economy will recover faster than the Fed thinks it will.
Factors Affecting Gold This Month
SIGNS OF IMPROVING ECONOMY
Most of the economic news from the government this month came in above expectations. This buoyed market sentiment, and pressured gold. For example, retail sales increased by 5.3% in January, helped by the $600 stimulus checks sent out by President Trump. Wholesale prices rose 1.3% in January, the largest monthly jump since 2009.
On February 17th, gold formed a death cross, after losing $70 an ounce over four sessions.
It wasn’t just economic news boosting investor sentiment. The COVID vaccination program finally started getting into gear.
COVID
The US started the month with more people who have had at least one shot of the coronavirus vaccine than there were active cases. COVID infection rates are slowing as more people are vaccinated. Faster rates of vaccinations have people hoping that things will get back to normal by Christmas. Investors are changing their portfolios now to take advantage of it.
However, new more contagious strains of the coronavirus from Britain and South Africa are causing faster infections this month. Health officials are accelerating vaccinations while pharmaceutical companies test new versions aimed at stopping these strains.
BONDS
Higher bond yields were the major direct driver of gold prices in February. The yield on the 10-year Treasury note broke above 1.3% on the 17th, and was partly responsible for gold prices entering a death cross the same day.
These rocketing bond yields are a direct result of the market thinking inflation is just around the corner. 10-year yields started February at 1.117%. It hit 1.2% on the 7th, 1.3% on the 16th, and 1.4% on the 24th.
More than $50 billion worth of bonds were sold in one session on the 25th, pushing yields over 1.6%. The yield on the 10-year Treasury eased back to 1.5% on the 26th, but analysts warn that there is more to come.
STOCKS
Higher Treasuries yields have sparked a “reflation trade” in the stock market. Investors are selling tech stocks and “stay at home” stocks, in favor of companies that will benefit the most from an end to the COVID epidemic. This rotation has been painful for the market as a whole, as stocks alternate between touching new highs, and getting battered down.
Growing worries of inflation suddenly rising are hitting stocks that will be adversely affected, and boosting bank stocks, which do better during inflationary times.Continue reading“February 2021 in Precious Metals, by Steven Cochran”