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 October?
Gold was range-bound between $1,890 and $1,930 in October, until it suffered big COVID-related losses the last three days of the month. Spot gold fell from an October 27 close of $1,907 to an $1,867 close on the 29th. Even this $40 drop did not move the average spot gold price in October more than a dollar, from $1,902 to $1,901 an ounce.
Silver moved in a two-dollar range between $23 and $25 (as of October 29), averaging $24.19 an ounce.
Stimulus talks between Nancy Pelosi and the White House were the lever that moved all markets this month. When markets thought a stimulus deal was near, stocks and gold rose, and the dollar weakened. When talks broke down, markets moved in the opposite direction.
Stocks and gold mostly ignored rising COVID infections until the end of the month. Sharply spiking cases and hospitals rapidly running out of ICU rooms hit both US and European markets at the same time. The massive selloff on Wall St saw gold prices plummet, as traders sold bullion to cover margin calls on short positions.
The first estimate of third quarter GDP came in at 33.1%, compared to the -31.7% drop in the second quarter. This news reversed early losses in the stock market, and sent the dollar sharply higher. The combination pushed gold solidly into negative territory for the month.
Factors Affecting Gold This Month
STIMULUS
The on-again, off-again stimulus talks between Nancy Pelosi and the White House were the major factor moving all markets until the explosion of COVID cases in the last week of the month. Corporate America would of course love more bailouts, so a second stimulus bill would be good for stocks.
A new stimulus deal would require more deficit spending. This would require the government to sell more Treasury bonds, which would push yields higher, and deepen negative real interest rates. This would improve the attractiveness of gold. More deficit spending would also weaken the dollar, which helps gold prices internationally.
The failure to pass a stimulus bill pushes stock prices lower as companies lose money and lay off workers. The government wouldn’t have to sell more Treasuries, which would promote a stronger dollar.
This dynamic has had gold moving the same direction as the stock market.
Political games eventually killed any hope for a stimulus bill before the election. Since the stock market was doing so well, neither side saw a stimulus bill as necessary, especially if it made the other party look good ahead of the election.Continue reading“October 2020 in Precious Metals, by Steven Cochran”



