Monday Morning Wrap Up – August 3, 2020

Last week was one for the history books.

After nine-years, gold surged to a new all-time record high – trading up to $1,977.50 as the Covid pandemic rages on, the economic data crumbles and the U.S. dollar crashes lower.

The GDP report was a bitter pill to swallow – even though we knew it was coming.

The 2Q GDP report revealed that U.S. economic growth plunged 32.9% in the second quarter. That marks the largest drop on record, in history.

The economic damage will take years to unwind, according to Capital Economics. Indeed, as many as 4 million small businesses could be lost entirely in 2020, according to the Wall Street Journal.

In the midst of the health and economic crisis, gold climbed 10% in July, cementing its best monthly gain in eight years. Bigger picture, gold is up 27% year to date.

The rally in gold is being complemented by a dramatic surge in silver prices as well. Silver is now up 33% year to date – as precious metals prove to be a safe-haven in this crisis.

Fed reveals its impotence

At a Federal Reserve meeting last week, the central bank revealed its impotence in the midst of this crisis. Having already printed trillions of new dollars since the start of 2020, the Fed appears to be out of bullets to help the economy.

Indeed, many – including Goldman Sachs – now warn that the Fed’s actions are debasing our currency, which leaves us at risk of losing the reserve currency status of the world.

Since the Covid crisis began, central banks around the world, led by the U.S. Fed, have pumped massive amounts of liquidity into the global economy.

However – it is becoming clear that trillions of new printed dollars aren’t what will revive the U.S. economy.

Instead, in order to revive the economy – the U.S. must gain control over the Covid pandemic.

The Fed stated that looking ahead, a fair amount of economic uncertainty exists and that the “path of the economy will depend significantly on the course of the virus.”

The Fed kept interest rates at 0%, at its latest meeting and is expected to maintain that level for the next several years.

Stimulus Ahead?

The extra $600 per week in emergency unemployment benefits expired last week. While Congress has been debating a new round of emergency stimulus, talks are on-going.

With Congress scheduled to go into recess August 10 through Labor Day, there is growing concern the next stimulus package will stall and not get passed before the policymaker’s vacation.

The Presidential Vote

Looming large for the United States, the presidential election is a few months away – and will continue to take up a greater share of headlines. The nation is preparing for a potentially turbulent election cycle as public confidence in the electoral process may be eroding.

Last week President Trump floated the idea of postponing the Nov. 3 election.

Investors should plan and prepare for stock market turbulence into year-end – as the on-going health crisis, the election and on-going debasement in the dollar loom large.

Hurricane seasons heats up

As the hurricane season begins to heat up on the Atlantic coast, Tropical Storm Isaias threatens Florida. Just as the Covid-19 pandemic has altered so many aspects of our lives – hurricane prep is complicated by the virus. Florida authorities are challenged with how to prepare shelters where citizens can seek refuge from storms if needed – while safely social distancing and staying healthy.

If you are in a hurricane prone area, take the time now to prepare your emergency supplies and your family escape plan.

Last Word

Gold posts its highest weekly close on record – now what?  

“Still bullish and still buy dips,” says a July 29 BofA Global Research report.

Have a good week!

Best,

David