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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.

Tuesday, July 10, 2018

Incrementum AG Fund Manager Says Now is the Time to Buy Gold

Gold market has reached its lows for the year, with prices to gain traction as investors lose optimism.

According to one notable strategist, the gold market will soon see a strong shift in momentum and an accompanying spike in prices. A recent article on Kitco features Ronald-Peter Stoeferle, fund manager at Incrementum AG, and why he believes gold is headed towards an uptrend in the near term.

In the article, Stoeferle says that the gold market has already reached its lows for the year, and that prices will begin to gain traction as investors lose some of their optimism. Stoeferle added that gold's current levels make right now a good time to load up on bullion.

The money manager listed several favorable developments that will keep gold ahead in the coming months. According to the article, signs show that the recovery in the dollar is already losing steam and that investors are being less confident regarding the greenback's future. Stoeferle said that the dollar is bound to go down as the Federal Reserve rounds up its tightening cycle.

As investors come to realize that the Fed doesn't have a lot of hiking room left, the article states the dollar's rally will begin to fade. Stoeferle said that the downturn in the dollar has been a long time coming, noting that many investors were shorting the currency at the start of the year.

The fall in the dollar will coincide with another round of trade tensions and the ensuing market stress reports the article. He sees the potential threat of a trade war as a big statement in gold's favor, as the fallout could act as a major booster for the gold market. Stoeferle said that the growing global uncertainty could force the Fed to return to a looser monetary policy, which would further support the metal.

Stoeferle feels that his forecast for the dollar goes in line with key U.S. officials who have stated that a weaker dollar would be positive for trade. Even President Trump has, on several occasions, likewise called for a lower dollar in order to strengthen U.S. trade.

Although the booming stock market has been gold's greatest nemesis, the article writes that equities will end up bolstering the metal's price. Like numerous analysts, Stoeferle thinks that the record-setting equities are finally winding down. He views the trouble in emerging markets as an omen and a sign that the rest of the stock market will soon follow. The weak technical picture in the stock market is another point that gold will draw strength from.

To Stoeferle, the metal's tenacity in difficult times is the surest indicator of its ceaseless value. Even when other assets posted historic runs, gold remained competitive and avoided selloffs while waiting to make its move up.

Wednesday, June 13, 2018

ING Analysts See Gold Hitting $1,400 This Time Next Year

ING's team believes gold stands to gain more from uncertainties than it has in recent months.

ing sees gold hitting $1400

According to a recent report by ING, gold will eventually break past its current levels and make a run above $1,400 an ounce. Kitco reported that the metal has enjoyed numerous positive geopolitical and macroeconomic developments, which included the U.S.-North Korea conflict, trade tensions between the U.S. and various countries and several flare-ups within the eurozone.

ING's team believes that the metal stands to gain much more from these uncertainties than it has in recent months. Besides current tailwinds, ING's commodities strategist Oliver Nugent said that the metal will be assisted by several new catalysts.

One of the primary drivers of the breakout, said Nugent, could be a willingness by the Federal Reserve to allow inflation to run past the targeted rate of 2%. The article writes that inflation only recently moved towards the long-coveted 2% after trending downwards for a prolonged period of time. Some analysts warned that the sudden reversal could mean an explosion of the inflation rate past what the Fed could manage.

These concerns could prove valid as inflation continues to run upwards, having most recently clocked in at 2.5%. Should the Fed allow inflation to run its course, whether by choice or necessity, gold would find itself among the primary beneficiaries reports Kitco.

A shift in inflation expectations would also help move gold towards ING's forecasted price. While expectations have been subdued in recent months, Kitco writes the steady uptrend in inflation could eventually affect sentiment and tell market participants that it's time to brace for significantly higher prices.

Although there is little question that lower bond yields play in gold's favor, Nugent thinks that the drop in Treasuries was another booster overlooked by the gold market. Nonetheless, the ongoing loss in yields should prove to be a major factor in gold's rise predicts Kitco.

"Since its peak two weeks ago (May 16th) US treasury yields have fallen hard, boosting gold's appeal as a non-yielding asset and supporting a brief break above $1300/oz. The ten year has dropped from a high above 3.1% to a low of 2.78%, before recovering slightly but still remains below the psychological 3%," said Nugent.

The analyst believes that geopolitical tensions could come to a head as the G7 summit draws to a close, with many of the attending countries being at odds with one another over trade issues. Strong physical fundamentals will also support gold, said Nugent, with recent Swiss export statistics featuring a prominent upgrade. The country recorded a 2% increase in bullion exports for the first four months of 2018, an increase driven largely by Chinese demand.

Ultimately, ING believes gold's long-term trajectory is set in stone, as the bank expects the metal to average $1,400 an ounce by the second quarter of 2019.

Tuesday, May 22, 2018

Gold to Emerge as an Important Asset for Current Times

Despite a tame month, gold is set to remain a key part of any portfolio.

gold a useful tool for portfolio

Although multiple factors converged to push gold prices lower in April, an article on Financial Express says the metal could still emerge as the year's marquee asset due to the state of the global economy.

Besides temporary relief from geopolitical tensions and a rise in bond yields, a stronger U.S. dollar was also a major contributor to a tame month for gold. After a prolonged decline that raised eyebrows with both domestic and foreign investors, the dollar index finally caught some respite and reversed its trajectory. According to the article, the greenback now sits at multi-week highs, a position largely influenced by the Federal reserve's hawkish stance.

Having left interest rates unchanged during their latest meeting, the Fed nonetheless affirmed their previous forecast for a total of three rate hikes in 2018. Officials also expressed their desire to continue with the monetary tightening for the foreseeable future should current economic conditions persist. And while successive rate hikes are generally seen as negative for gold, there are ways that the metal could reap the benefits from this aggressive policy says the article.

To some, the Fed's current course is analogue to taking away the proverbial punch bowl. Given the loose monetary policy of the last decade, a sudden shift to a more austere approach could shock the laid-back markets. Among the worst to suffer this effect could be the long-soaring stock market states the article, which recently begun to show cracks after seeming invulnerable. The Fed's goal of reducing their balance sheet by $420 billion this year and $600 billion the next could slowly introduce discord into equities. Despite tax cuts and other encouraging developments, 2018 could see investors' optimism dwindle as they wake up to the reality of a lesser money supply.

Inflation expectations could act as another source of gold's strength. The Fed is confident that it can maintain the targeted inflation rate of 2%, and much of their current agenda rests upon it. But many are quick to forget that inflation was moving in the opposite direction for some time, raising concerns that the reversal was achieved too quick. Given that the ideal 2% have already been surpassed, the Fed could find itself struggling to deal with soaring inflation. In this environment, the article says gold would quickly become a most-desired commodity.

The economic tug of war between the U.S. and China will also continue to remind investors that gold is a key part of any portfolio. Despite the seeming calmness in recent weeks, the situation is only beginning to develop, and the leaders of both countries are unlikely to back down. Global growth, industrial metals and energy will all come under attack should the threat of a trade war return.

The article states that this would harm bond yields as investors shun U.S. debt, and the rapid expansion of the latter has already placed the dollar's long-term purchasing power into question.

Regardless of short-term happenings, the ongoing lack of equilibrium in the global economy along with constant geopolitical flare-ups are sure to preserve gold's favor among risk-averse investors.