The price of gold sharply rallied yesterday, increasing more than 3.5% higher to over $1,950 an ounce — a six-week high for the yellow metal.
Meanwhile, sister silver traded some 5% higher yesterday, selling now for over $25.50 an ounce.
But yesterday’s action in the precious metals market might be a bit short-lived.
Precious metals rallied yesterday as the U.S. dollar fell and the pound sterling rose. The pound increased to its highest levels since September after the Bank of England announced it will pump another £150 billion (USD$195 billion) into the UK economy amid a second lockdown across Britain.
The BOE warned new restrictions could lead to quarterly GDP declines, meaning Britain would suffer from a second downturn this year. The bank wrote:
Informed by recent movements in high-frequency indicators of activity and announcements about Covid-related restrictions, UK GDP is projected to fall in Q4. That largely reflects lower consumer spending on social activities, which is assumed to be partially offset by higher spending on other goods and services.
What shocked investors most: the BOE’s £150 billion asset purchase scheme is 50% higher than economists expected and had been announced by British officials.
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All this moved the value of the pound sterling much higher yesterday, which weighed down on the USD. It’s likely the pound sterling will remain strong today on the back of the announcement. But by Monday morning it’s also likely there will be a million new factors pulling the currency in a million different ways.
So the gold rally on the back of a stronger pound might be a bit short-lived.
Still, we believe gold is on the verge of a huge jump in prices. So when the sell-off does occur, it will be a great time to pick up gold stocks.
Interest in gold mining stocks seems to be recently increasing as reflected by rising volumes in gold mining ETFs like GDX. And trading gold stocks hasn’t been this good for years.
In Junior Mining Trader we bought Kinross (NYSE: KGC) last Thursday under $7.80. It opened this morning at $8.58, giving us a 10% gain in five short trading days. Another stock increased so fast, we were unable to get a position. It went from $1.60 to over $2 in 24 hours.
We strongly urge you to start taking serious positions in discounted gold stocks. Gold stocks did pretty well in 2020, but next year they’re going to be the market darlings.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
