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Tuesday, December 4, 2018

Precious Metals Analysts Bernard Dahdah Sees Gold Shining in 2019

Natixis sees imminent economic growth slowdown and accompanying upturn in gold.

natixis sees gold going up

As gold investors try to guess what 2019 could bring, one French bank is bullish on the metal's prospects next year amid a change of economic climate in the U.S. Talking to Kitco, Natixis' precious metal analysts Bernard Dahdah said his bank sees an imminent economic growth slowdown and an accompanying upturn in gold prices.

The average domestic investor has had little difficulty maintaining optimism this year. The Federal Reserve proceeded with its hawkish agenda, backed by positive economic data reports and a high-riding dollar. President Trump's historic tax cuts also extended his campaign promise of a reinvigorated U.S. economy. But according to the Kitco article, several flash crashes in the U.S. stock market, most recently in October, affirmed to investors that trouble might be brewing.

Dahdah points out that market participants were quick to rejoice over tax cuts while ignoring the more significant issue of budget deficit. Whereas the cuts were only intended to serve as a short-term stimulant, the article writes that the $985 trillion of projected deficit for 2019 is a long-lasting issue without an easy solution.

Dahdah expects the U.S. deficit to become more prominent next year and force government officials to take a step back. The fading of the stimulus effect will place further pressure on stocks, likely leading to more corrections. Meanwhile, the Fed will wrap up its tightening cycle after years of successive hikes.

According to the article, this environment of stagnant growth and tumbling stock valuations will play directly into gold's hand as investors rush to move away from riskier assets. The weakening of the dollar, expedited by the change in Fed's policy, will remove additional pressure from the yellow metal. Dahdah said that the dollar index will face more hurdles as central banks around the world commence their own tightening.

The return of uncertainty will quickly bolster gold prices, and Dahdah sees the metal averaging $1,275 an ounce in 2019. However, the analyst noted that gold has plenty of catalysts waiting in the wings, and that the metal could shoot up to $1,350 an ounce next year.

Natixis also sees great things in store for silver after a middling year. According to the article, the bank predicts silver will catch up to gold due to renewed interest in commodities, thereby closing the gap in the highest gold-silver ratio since 1993. Dahdah said that investor demand will push silver to an average of $16 an ounce in 2019 with the possibility of a climb to $18 an ounce.

Tuesday, November 13, 2018

Amid Global Economic Concerns, World Returns to Gold

Dr. Makhdoomi states when people loose faith in a government, the solution is precious metals.

world return to gold over currency

Despite the outwards appearance of stability, the global economy runs on an inflationary system that confines it to an endless cycle of crashes and reboots. And, according to Greater Kashmir's Dr. Makhdoomi, the world's economic woes can be traced to the abandonment of the gold standard, albeit much earlier than the Nixon Shock in 1971.

Two and a half millennia ago, the government of Athens used a sound economic system with a set currency value based on physical gold writes Greater Kashmir. Yet wartime expenses drove the government to inflate its bullion reserves by minting coins of a lesser purity. With the addition of copper, 1,000 gold coins became 2,000 and the government had enough leeway to fund its ventures, even at the cost of currency stability.

As simple as it might seem, the very same method of funds creation is used today by governments around the world at a much larger scale. As Makhdoomi explains, any spending done by a modern government is done in the red, as no sovereign country operates without a budget deficit. When a central bank needs more money, the solution is to simply print new currency and worry about the inflationary consequences later. According to the article, the problem is exacerbated by the issuing of government bonds, which create more money out of thin air.

Makhdoomi points out that, when given enough false assurances, the people can and will lose faith in a government. When they do, he says the solution is always to rush back to precious metals as a way of preventing wealth erosion amid increasingly questionable central banking practices.

Consumers have come to equate money with currency, even though the latter has no intrinsic value and is merely a government's promise. According to the article, the price movement of gold in dollar terms is a perfect example of this, as an ounce of metal went from $40 in 1971, when President Nixon moved away from the gold standard, to over $1,200 today. The jump in value illustrates how much money has been printed since then in a baseless free-floating currency system.

Makhdoomi, however, believes today's gold prices might still be far lower than they should. Some pundits, such as monetary historian Mike Maloney, believe that an economic crash is closer than most think. When things go awry, Maloney expects gold and other precious metals to come under revaluation with a rapid price jump to $5,000 an ounce.

Both Makhdoomi and Maloney agree that the next major crash will be accompanied by a wealth transfer. Depending on whether one invested in gold or kept their faith in currencies, this could either translate to massive profits or a risk of losing everything.


Tuesday, October 23, 2018

Analysts Say Gold Poised to End Year on a High Note

Gold expected to do well in the last few months of the year with more upside potential in 2019. 

gold buyers are back

Having gained 3.5% over the previous week, gold seems poised to end the year on a high note after two mild quarters says CNBC. The CNBC article writes that different analysts expect the metal to do well in the last few months of the year before moving on to post a strong performance in 2019.

Jim Steel, chief precious metals analyst at HSBC, attributes gold's performance this year to an overbearing dollar which, along with higher-yielding Treasury notes, diverted some safe-haven demand away from the yellow metal. According to CNBC, Steel said gold was severely oversold below the $1,200 level, as it recently had the largest amount of shorts since 2001. He explained that dips such as these are bound to attract bullion investors, especially those in Asia.

Steel noted that bearish sentiment among speculators created an excessive short position that could ultimately act as strong support if sellers end up having to cover their bets due to higher prices.

Although a pick-up in physical demand in emerging markets played an important role in the price spike, Steel thinks the concerning equity picture is what really placed gold back into the spotlight reports the article. The S&P 500 index notched major daily losses in back-to-back weeks as investors grew increasingly worried over tensions between the U.S. and China, shaky emerging markets and economic issues brewing in the eurozone.

According to CNBC, the Fed's assurance that rate hikes would continue into the new year was another source of concern, with some feeling that the central bank is too eager to tighten. But Bart Melek, head of commodities strategy at TD Securities, believes the Fed might not follow through with its intent to raise the funds rate above 3% by the end of 2019. In particular, he says the Fed could be dissuaded from tightening by additional flare-ups in the stock market.

Melek noted that a drop in the 10-year yield from above 3.25% to 3.15% also helped gold take back safe haven demand. A loss of faith in the dollar's long-term picture could further strengthen gold's case in the near future.

The strategist sees gold holding onto its gains as the year comes to a close, expecting an average of $1,225 for this quarter. From there, Melek thinks the metal will average $1,325 an ounce by the fourth quarter of 2019.

HSBC predicts that the metal will average $1,274 an ounce this year with plenty of upside potential in 2019. Steel pointed to record volatility that the markets suffered from earlier in the year, which brought the metal to $1,360 an ounce. According to CNBC, he expects the markets to slip back into turbulence again, cementing gold's long-term position and giving way to ample short covering among speculators.

Tuesday, October 2, 2018

Barron's Sees Gold Staging a Comeback in the Near-Term

Despite lack of enthusiasm from large speculators, gold remains as popular as ever.

barron's time to own gold

In a recent article on Barron's, columnist Andrew Bary outlined why gold could be staging a comeback in the near-term. Newsmax reported on the article and wrote that, despite the lack of enthusiasm from large speculators, gold remains as popular as ever among cautious investors and those looking to shield themselves against the dollar's depreciation.

Although it isn't making the headlines, Bary notes that global inflation is something every investor should prepare for. As GoodHaven portfolio manager Keith Trauner explains, governments around the world are dealing with an immense amount of sovereign debt. According to the Newsmax article, policy makers will always see inflation as preferable to defaults or restructuring, which is why a steady uptick in prices will continue to be the norm. Few assets can boast of having retained their value against the dollar over the past century, which makes gold the ideal hedge against a guarantee of high inflation.

Potential losses in the dollar are another source of relief for the yellow metal reports the article. Those who feel that the greenback is propped up and overbought rely on gold's strong negative correlation with it to guard against a potential pullback.

According to the article, the general consensus is that higher interest rates will continue pushing down on gold, with the federal-funds rate expected to rise by 1% between now and late-2019. Yet many forget that the inflationary 1970s, which hosted a record number of rate hikes, still rank among gold's best decades, showing that the metal can thrive in an environment of higher rates.

Gold's unyielding scarcity likewise speaks in favor of a recovery. The roughly six billion ounces of gold available today, worth at least $7 trillion, are minimally replenished year-on-year, as the total annual mining output amounts to less than 2% of the global supply. Mining efforts have been complicated by the cost-cutting closures of many mines over the past decade and a dearth of new exploration, giving weight to warnings that the supply of gold is rapidly dwindling, writes Newsmax.

Large investors with a keen eye for precious metals aren't waiting for gold prices to surge, as evidenced by John Paulson's recently-formed coalition whose goal is to breathe new life into the gold industry. Besides the billionaire fund manager himself, other prominent members of the 16-member group, called Shareholders' Gold Council, include fellow money manager John Hathaway and Egyptian billionaire Naguib Sawiris. Sawiris, who makes the list with his La Mancha Group, said in April that he invested half of his $5.7 billion net worth into gold.

Paulson's decision to unite institutional gold investors comes as large funds continue to shun gold in a gesture that many interpret as a sign of higher prices to come.


Tuesday, September 18, 2018

Analysts Say Win-Win Situation is Forming for Gold

Despite the dollar's recent gains, ScotiaMocatta sees gold recapturing its haven appeal.

gold in a win win situation

In the latest edition of ScotiaMocatta's monthly Metal Matters report, the bank's analysts examined gold's prospects amid various geopolitical escalations. After falling for much of 2017, the U.S. dollar managed to rebound in December and has since attracted the attention of safe haven-oriented investors.

According to a recent article on Kitco, ScotiaMocatta sees gold eventually winning against the greenback and recapturing its haven appeal. A notable part of gold's tepid summer was a lack of response to risk factors that would otherwise warrant a price boost. But now, with a clear bottom forming on the chart, the analysts are certain that gold will receive its long-overdue benefits from the myriad of risks on the horizon.

Among them is a well-publicized tariff battle between the U.S. and two of its main trading partners in China and Canada reports Kitco. The Asian nation has seen over $200 billion of its exports to the U.S. incur higher levies and has pledged to retaliate in kind. Meanwhile, Canada finds itself facing a possible exclusion from the trillion dollar-worth Nafta agreement, which would greatly complicate trade with its U.S. and Mexican neighbors.

Iran has also been a source of concern, as the country saw its economy placed into question by sanctions imposed by the U.S. over nuclear disagreements. The situation will likely worsen towards the end of the year says Kitco, when further sanctions are scheduled to take place.

ScotiaMocatta also expects flare-ups in emerging markets to make an impact on gold's price, noting that the strength of the dollar has highlighted the weakness in various emerging economies. According to the article, the recent economic upheaval in Turkey has taken center stage, with the country experiencing a hyperinflation scenario similar to that of Venezuela. The presence of several European banks in Turkey raised concerns that the crisis could spread across the entire eurozone as well as complicate the region's handling of migrants. The analysts listed Argentina, South Africa, Russia, Brazil and Italy as other potential sources of risk, whether due to issues with their respective governments or those stemming from U.S. interference.

To ScotiaMocatta, this is a win-win situation for gold, as renewed safe-haven demand will be further strengthened by lower price levels. Likewise, emerging market crises could make the world's leading central banks, including the Federal Reserve, hesitate to continue applying their tightening policy writes the article.

The bank listed $1,241 an ounce as a key level to watch out for in the gold market. According to the analysts, a holdout above this threshold, coupled with any sign of weakness in the dollar, could trigger an aggressive price rebound in the metal as funds rush to cover their positions.

Tuesday, August 21, 2018

Multiple Analysts See Gold Rebounding in the Long Run

The general consensus is gold is in a position to retrace, it's just a matter of how far.

gold playing for the long run

As gold approaches the finishing line for a lukewarm quarter, a recent Kitco article reveals multiple analysts see the metal rebounding as we move closer to December. In an interview with Kitco, ICBC Standard Bank commodities strategist Marcus Garvey stressed that gold's lack of performance this summer is merely the result of an outperforming dollar.

However, the greenback could be testing the limits of its rally in the near term says ABN Amro precious metals and diamond analyst Georgette Boele. In the article, Boele adds that her bank expects a moderate recovery in the Chinese yuan, which should further support gold through year-end.

Analysts also took note of the record net short positions amid gold traders, interpreting them as a sign that a rebound is close. In the article, Garvey pointed out that lower prices have an upside as they open up new windows for physical demand, especially in India. To him, this is a familiar set-up for a short-term rally, one that could be triggered by minute news of slower U.S. growth or improved U.S.-China relations.

The general consensus appears to be that gold is in a position to retrace, with various opinions as to how far. According to the article, FXTM research analyst Lukman Otunuga and TD Securities commodity strategist Ryan McKay both view $1,200 as a very important psychological level, adding that it would be a bullish sign if prices manage to hold above it. On the downside, the two analysts see $1,160 an ounce as the worst-case scenario. Kitco's senior technical analyst Jim Wyckoff feels that bearish sentiment in the gold market could be nearing exhaustion, and that prices should steadily move up beginning next week.

Predictions for the six-month period are more positive, as analysts agree that the metal could be bottoming out soon reports the article. ABN Amro sees the metal reaching $1,250 by December before climbing to $1,400 by the end of next year. Gold's recovery will move across the $1,200 range and potentially reach $1,300 an ounce within six months, said Garvey, who also dismissed the view of the dollar as a safe-haven competitor.

TD Securities said that a slowdown in the greenback's rally and a wrap-up of the U.S. hiking cycle will help gold prices rise back to $1,250-$1,275 before the end of the year. Capital Economics shared their bullish long-term outlook for the metal, stating that gold should thrive over the coming years due to a number of favorable factors.

These will include a fading fiscal stimulus and the possibility that the Fed will have to lower interest rates once again. Capital Economics commodities economist Simona Gambarini said that U.S. GDP growth will slow to 2.0% in 2019 and 1.3% in 2020, reintroducing the weakness in the dollar seen throughout 2017. Gambarini said that her firm sees gold reaching $1,350 an ounce by end-2019 and $1,400 by end-2020, adding that the metal will outperform the euro as it moves back up.

Tuesday, July 31, 2018

China May Secretly be Adding Gold to its Reserves

Officially, Chinese bullion reserves sit at 1,843 tons of gold. However, their hoard could be much larger than the numbers released.


If history is any indicator, we could be nearing an announcement that the People's Bank of China (PBOC) expanded its gold holdings substantially, reports Newsmax. Officially, Chinese bullion reserves sit at 59.24 million ounces, or 1,843 tons of gold. The figure has remained unchanged since October 2016, shortly before Donald Trump was elected President.

However, according to the article there are signs that suggest China has quietly been adding to its reserves over the past two years. This means, they could be boasting a gold hoard much larger than the numbers given to the public. Before mid-2015, irregular updates by the PBOC weren't considered unusual as the country had only updated its official figures once between 2009 and 2015. Then suddenly, the PBOC revealed a 57% increase in bullion holdings over a period of six years.

The shift towards monthly updates since July 2015 coincided with stricter International Monetary Fund regulations, as China wanted to have the yuan included in the Special Drawing Rights basket. The updates ceased almost immediately after the yuan became part of the SDR in October 2016.

Analysts have little doubt that China's gold holdings have indeed grown since the last update states the article. In fact, Philip Klapwijk, managing director of Precious Metals Insights Ltd., views bullion acquisition by the PBOC as a strategic imperative.

Klapwijk referred to heightened trade tensions between the U.S. and China as the biggest reason why the latter would want to have as much bullion as possible. According to the article, the threat of escalation puts into question the future of China's massive export figures, and bolstering the central bank's bullion reserves would give the government more freedom amid economic constraints.

Klapwijk also pointed out that China's government has plenty of room to amass bullion even in the absence of international purchases. The people of China consistently rank among the top buyers of gold jewelry in the world, in large part because the average citizen is inclined to treat gold ornaments as an investment. If needed, the article writes that the PBOC could access the people's jewelry holdings to obtain a significant amount of bullion. Furthermore, as the world's largest gold miner, China retains the option to simply purchase its own ore rather than export it.

Mark O'Byrne, research director of precious metals broker GoldCore Ltd., is certain that China has already increased its gold holdings by a wide margin over the past two years. To O'Byrne, it's only a question of how large the figure will be when the update is finally revealed.

Expectations that China may have quietly added to its gold hoard over the past two years fit into a general view held by many market participants that China's bullion reserves are actually far greater than reported. Given the nation's propensity towards gold, both on a state- and consumer-level, some have speculated that China's true bullion holdings could be twice as large as the officially reported 1,843 tons.