Street View: Let’s Talk About Gold

Market Blog

Gold continues to move higher and higher, making new all-time highs along the way. As we discussed in Calendar Concerns and Gold Gains, we see many fundamental reasons to expect this rally in gold to continue.

Here are the 10 reasons we listed:

  • The US dollar at its lowest level in more than two years. Historically, gold and the US dollar have traded inversely. We continue to expect a lower trending US dollar as we discussed in our July 23 LPL Research blog, Dollar Weakness May Continue.
  • Growing concerns over US-China relations.
  • COVID-19 uncertainty and potential economic weakness.
  • European data quickly improving. Europe is doing a great job containing COVID-19, thus potentially strengthening the euro—which may pressure the US dollar lower.
  • Record monetary stimulus. The Federal Reserve (Fed) balance sheet exploded to $7 trillion recently, from $4 trillion before COVID-19.
  • Nearly $15 billion worth of negative sovereign debt globally.
  • Record trade and budget deficits.
  • The Fed’s 0% interest rate policy is probably here to stay.
  • Negative real interest rates (adjusted for inflation). This makes gold’s 0% interest look pretty good on a relative basis.
  • Huge government spending programs may eventually spur inflation.

Something else we didn’t discuss, but is worth examining is the concept that maybe gold isn’t really at new highs. “Gold is a metal, so it doesn’t pay you any dividends; therefore, inflation can eat away at its true value over time,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, when you factor in inflation, the real all-time high was more than $2,700 an ounce in 1980. Gold isn’t even above the 2011 peak when considering inflation, so maybe this is another way of showing gold has room to run?”

As shown in the LPL Chart of the Day, if you adjust for inflation, gold is still well beneath the all-time high set in early 1980, and beneath the recent peak in 2011.

View enlarged chart.

For more of our thoughs on gold and why higher gold prices aren’t a warning sign for the stock rally, check out our latest LPL Street View video with Ryan below.



This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

  • Not Insured by FDIC/NCUA or Any Other Government Agency
  • Not Bank/Credit Union Guaranteed
  • Not Bank/Credit Union Deposits or Obligations
  • May Lose Value

For Public Use – Tracking 1-05042460