As Recession Fears Grow, Gold Ascendant

The dollar took a hit, with the dollar index tumbling 0.5% as U.S. private payrolls rose less than expected last month. “(The job data) is really raising the recession concerns that have been brewing in the market and supporting gold,” said Ryan McKay, commodity strategist at TD Securities, to Reuters. “A portion of the investors and traders are starting to question whether the Federal Reserve will really be willing to be as hawkish as has been anticipated.”

ADP National Employment Report data indicated that just 128,000 jobs were added to the books last month after forecasting 300,000. This data was coupled with the number of Americans filing for new unemployment benefits claims falling as labor demand remained strong. The Fed is in a position where it is trying to dampen demand for labor and reign in inflation without pushing unemployment rates too high. Tomorrow’s nonfarm payrolls data has potential to drive gold prices. Strong growth is expected.

Gold now sits above its 200-day moving average of $1840.64 and is edging closer to its 50-day moving average of $1895.91. Furthermore, the fundamentals for gold remain strong as supply chain issues, Russia’s war in Ukraine, and volatile markets continue to make the case for gold as a critical portfolio hedge. There is no end in sight for many of the issues plaguing the markets, and gold’s historical record as a safeguard of value makes it an incredibly important part of any portfolio seeking to weather the turbulence of the moment.

Though gold prices have been parked in a fairly narrow range of late, demand is increasing. The U.S. Mint sold 147,000 ounces of gold last month, its best May performance since 2010. Bullion demand is up a whopping 617% on the year.

“Bullion sales better reflects the anxiety investors are feeling right now. When you hear economists talk about a recession, it starts to make sense why bullion sales are so strong,” Phillip Streible, chief market strategist at Blue Line Futures, said to Kitco News. “Gold will always be a long-term store of value.”

Investors can get exposure to physical gold through the Sprott Physical Gold Trust PHYS. For a gold equities play, investors can look at the Sprott Gold Miners ETF (SGDM ) or the Sprott Junior Gold Miners ETF (SGDJ ).

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