DAILY MARKET REPORT

Gold inched higher in early U.S. trading after a relatively quiet night overseas – up $1.50 at $1293 – as the world’s attention shifted to the United Kingdom and today’s vote on Brexit. Silver is down 1¢ at $15.67. A House of Commons’ vote is scheduled for later this afternoon. A firmer U.S. dollar is helping to keep gold constrained this morning.

The major news services are predicting a defeat for the current plan for Britain’s departure from the European Union leaving it a guessing game as to what might happen next in the world’s fifth largest economy. We have seen estimates of up to $1 trillion in capital flight from Britain as a result of that departure. Safe haven demand for gold on both sides of the English Channel has been one of the hallmarks of the departure wrangling.

U.S. Global Investors’ Frank Holmes offers the following summation of the current gold market: “Gold, meanwhile, is set for its fourth weekly gain, marking its longest rally since October. Traders surveyed by Bloomberg are bullish on the yellow metal for a ninth straight week. . .ETFs backed by gold saw 10 straight days of inflows, adding 37,174 troy ounces on Thursday alone. This year’s net purchases so far are 762,975 troy ounces, according to data compiled by Bloomberg.”

Quote of the Day
“But the same analysis applies to debased or light-weight coins driving out full-bodied coins. Examples abound in the ancient literature of the consequences of coinage debasement. From the very beginning of coinage, generally assumed, on the authority of Herodotus, to originate with 7th century Lydia, coinage was overvalued. The earliest coins were made of electrum, a natural alloy of about 70 percent gold and 30 percent silver. But hoards of the earliest coins found in the Temple of Artemis at Ephesus in 1904 contained ;artificial’ electrum coins with much lower gold contents. The weights of the stater coins (or its fractions) were uniform but the gold contents were as low as 30 percent. The Lydians and Greeks had not only learned how to use ancient Egyptian techniques of metallurgy, but also how to overvalue coins by using less of the more expensive metal and exploit the monetary prerogative as a fiscal device.” – Robert Mundell, Uses and Abuses of Gresham’s Law in the History of Money

Chart of the Day

Chart and note courtesy of the World Gold Council/GoldHub

Chart note: “Large net short positions,” says the World Gold Council, “are often prone to covering, creating buying opportunities for investors. In addition, gold speculative positioning in futures markets remains low by historical standards after hitting record lows in the final months of 2018. CME managed money net long positions stand near record low since 2006 – when data was first broken down by investor type. Furthermore, net combined speculative positions, which go back further, are negative for the first time since December 2001. And large net short positions have historically created buying opportunities for strategic investors, as such positions are prone to short-covering adding momentum to rallies in the gold price.”

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