Gold Fever is spreading
Stephen Innes Vanguard Markets FX Street June 17, 2019
As we mentioned last week, Gold should at minimum be on everyone's radar if not in everyone portfolio. After the break of the psychological $1350, Gold is reclaiming its rightful status as a must-have asset in everyone’s investment portfolio.
Indeed, what a difference a fortnight makes. From a vocal chorus of indifference and reliant on central bank demand to Friday's fear of missing out momentum which propelled prices to a new 2019 high.
“Gold is back in play, and Blue horseshoe loves "yellow metal".”
Gold climbed to the highest levels in more than a year. But adding to Golds allure is that prices traded well despite rebounding equities and a firmer USD. And while the prospect of lower U.S. rates and dovish Fed expectations remain supportive, Gold appeal goes well beyond that and is moving higher on own its accord as a safe and inexpensive hedge against the abundance of tail risks rapidly wagging.
Trade war and recessionary fears
The G20 summit will be significant for risk assets and while we don't know if tariffs will escalate from here, but we do know there's a substantial risk that they will. And while we remain unsure how the Fed will react this week, but we do know that if tariffs escalate, it will be a potent threat to U.S. growth and so the likelihood of an aggressive Fed cut will also rise. Gold represents insurance against those risks. If you live in tornado alley you would be crazy not to buy home insurance so with a category five recessionary storms brewing; it only makes sense to purchase Gold as portfolio insurance.
I’m far more worried than the market about the activity in the Strait of Hormuz probably because I traded Gold through both Gulf wars, and I know how quickly browbeating can escalate.
So, in my view, it was escalating Global geopolitical risks that triggered Friday’s move, but this type of haven appeal is are very volatile and extremely sensitive to headline risk so tread carefully.
While the Gold bulls were a bit disappointed $1350 didn't hold, we did notch a 12-month high suggesting at minimum Gold’s relevance as an essential safe-haven asset will continue to build.
Also, given the lightning pace of Friday’s move, we suspect Gold remains under-owned and will be super reactive to geopolitical headline risk and global recessionary waxing.
Any negative will trigger another massive wave of buying. So, buckle up we could be in for nervy times.
After the rebound in U.S. retail sales on Friday, the markets pared back extreme FOMC dovish bets. So, with the speed of Fridays climbs, overextend Gold positions pared risk and prices collected lower into Friday's U.S. close. But we view any pause or pullback, even as shallow as they may be, as an opportunity to buy
Central banks buying
And despite all the talk about lower U.S. rates and trade war hedges, it’s the official sector that remains the consistent pillar of support. And given the move to de-dollarize reserve, this demand will likely continue especially with trade war and the geopolitical risk abound. The great thing about central bank demand is that Gold remains in the vault doing little more than collecting dust for a very long time. So, there is little risk for these flows to reverse anytime soon
China's Central bank continued to hoover up Gold to the tune of 16 tonnes of bullion last month alone. So, if you're looking for a backstop for your gold position, you won't have to look too far, especially if you're an Asia based gold trader.
I remain unwaveringly bullish on Gold and continue to buy as it remains one of my highest conviction trade into 2020 and
On the Record
Innes sees Gold rising to $1400 in 2019(current price $1200): Dec 20, 2018, Bloomberg TV.
Innes remains bullish Gold June 11, 2019, Bloomberg TV.
Vanguard Markets Gold flow has started with a bang. Once my quants are happy with our risk parameters and overall hedging models, the next project is a Gold database which will track ETF flows, physical demand, pricing structure in both China and India, the COT and of course the official sector buying and any other stuff they find strong correlated “values”. Indeed, my inner gold bug is emerging from its cocoon.
Silver: An Explosive Metal In 2019
Taki Tsaklanos Investinghaven.com June 13, 2019
The price of silver (SILVER) is about to get explosive. It seems that everything is lined up for our silver price forecast 2019 as well as silver stocks forecast 2019 to come true. Particularly the silver price chart has an explosive looking. Interestingly, though, almost every precious metals related chart has some sort of explosive feeling.
The whole precious metals complex is trading at major, major breakout levels.
The gold chart as discussed in What Happens If Gold’s Price Rises 2 Pct And Breaks Out is just 2 pct below its 6.5 year giant bear market wall.
Gold and silver stocks are right at massive breakout levels in their 8 year bear market channels.
Silver has one of the most explosive setups.
The silver chart, in particular, is featured in this article.
Two years ago we were featured in this silver article on MarketWatch with our viewpoint that silver had peaked in April in that particular year.
This year, however, we believe the opposite is happening: we are at a major bottom in the silver market. Yes, as per our forecast, the silver price should rise at a minimum 50% from here.
Sentiment is horrible in the gold market. Anecdotally, a quick search on ‘silver price‘ in Google News does not return anything meaningful whatsoever. Not any financial outlet features precious metals, certainly not silver.
We like this a lot.
Because the combination of silver trading at major breakout point with a horrible sentiment is the ideal playground for a major bull run.
Still not convinced? No problem, just go back 4 months in time, and look at Bitcoin and crypto in general. We noticed *exactly* the same combination, and documented it even in the public domain Cryptocurrency Alert: The Crypto Winter Has Ended. This was published a month and a half before Bitcoin’s major breakout.
We were proven. We believe we will be proven right in the precious metals market as well, either in the next weeks or ultimately after summer.
The silver chart featured below does not need any comment, it is simply gorgeous! Ignore at your own peril, and avoid the situation of chasing prices higher after a 40% rally as you will be in a bad spot.
Gold Prices May Reach $1,500 By This Time Next Year
2 days ago at 9:58 am by Michelle Jones - Value Walk
Ever-climbing stock prices have kept a lid on gold prices for most of this year, but that could be about to change. Fund managers from Incrementum believe we have entered the early stages of a new bull market for gold, although they don’t expect an easy path upward.
In their annual “In Gold We Trust” report, Ronald-Peter Stoeferle and Mark J. Valek of Incrementum predict that gold prices could hit $1,500 by next spring—if all the pieces fall into place. They also explained the bullish signals they see and other gold market trends.
One reason some may question their call that the bull market for gold has already started is because stocks can't seem to stop rising. However, they looked below the surface economic data and point to the brewing credit crisis as a sign that things are about to change fast.
They describe gold as "the universal reserve asset to which central banks, investors and private individuals from every corner of the world and of every religion and every class return again and again." They also look forward to a time when "the natural value of this unique precious metal is once again fully appreciated. They argue that the markets have put too much trust in central banks and the U.S. economy, adding that when this trust shifts again, they expect gold to be raised back to "old honors and new heights."
Central banks have been buying gold
Other fund managers and market watchers have pointed out that central banks have been buying gold at rates not seen in many years, and Stoeferle and Valek noted the same thing. They explained that all this gold buying by the world's central banks is a signal that they no longer trust the U.S. dollar-driven status quo. Odey Asset Management said recently that it likes gold due to the demand from central banks.
Russia and China in particular have boosted their gold reserves over the last 10 years, which doesn't come as a major surprise. Other countries which have increased their reserves include India, Kazakhstan and Turkey. Hungary made its first gold purchases since 1986 recently. In fact, central banks bought 657 tons of gold in 2018—the largest amount of gold purchases since 1971 at the end of Bretton Woods.
If central banks are losing trust in the U.S. dollar as it seems they are, then it may only be a matter of time before the rest of the market follows suit.
In a further shift away from the dollar, they looked at gold prices in currencies other than the dollar. For example, they calculated what they call the "world gold price," which is essentially as a trade-weighted U.S. dollar. They said the world gold price is close to where it was at its height in October 2012, and the gap between the world gold price and the U.S. dollar is closing.
After bottoming out at the end of 2015, the gold price has started a trend of higher lows, which Stoeferle and Valek said confirms their positive view of the yellow metal. When looking at the gold price in other currencies, it posted gains in most other currencies in 2018. Only the allegedly "safe-haven" currencies like the U.S. dollar and Japanese yen saw small losses in gold last year. Even during significant corrections, gold has outperformed almost all other asset classes since 2001, with the average annual performance since then at 9.1%. This year has been a bit difficult for the metal, but they remain convinced that the bull market for gold is in its very early stages. As confidence in the U.S. and its currency wanes, gold's prospect should improve further.
Shifting gold sentiment
Stoeferle and Valek did say that sentiment on gold right now has been shifting steadily between "disinterest, agony, pessimism and slight confidence." Based on technicals and seasonality, they expect the gold market to remain cool for the next several weeks, but they don't expect a deep correction because they believe there's a lot of interest waiting on the sidelines.
Using the Coppock curve, they showed that gold is giving a buy signal right now, which occurs whenever the indicator turns up below the zero line.
The yellow metal typically bottoms out each summer, so they advise being patient until the low hits. However, if the resistance of $1,360 is surpassed, then their next target is $1,500 an ounce by spring 2020. They also pointed to the formation of a shoulder-head-shoulder pattern since 2013. They believe if the gold price breaks outside the $1,360 to $1,400 resistance range, then the next target would be near $1,800 an ounce based on the distance from the head to the shoulder line.
No strong opinion
For now, sentiment on gold is simply all over the place. Bloomberg data shows that analyst consensus has no strong opinion about the yellow metal right now. The consensus puts gold at $1,381 in 2022, but Stoeferle and Valek believe such a long sideways move is "extremely unlikely" based on past market behavior.
The gold/ silver ratio can also be used to gauge sentiment for gold because usually the only time silver prices are strong is when gold prices are also rising. They explained that during these periods, investors are looking for higher leverage and end up buying mining stocks or silver. Given that the gold price is still "meandering," they predict that silver won't rise much until gold's next breakout attempt. They add that the gold/ silver ratio is now at 88, which indicates that precious metal sentiment is now "at rock bottom."
Based on the "Midas Touch Model," gold has been in "bearish mode" since May 20. For now, they expect the ongoing "mild" correction to continue with the gold price finding a bottom between June and mid-August, possibly between $1,200 and $1,250.
"In the bigger picture, this would not violate the series of higher los but rather strengthen the promising ascending bullish triangle formation that gold has seemed to tinker with since its low at USD 1,045," they explained.
Looking at the four individual ratio parts of the Midas Touch Gold Model, they said none is "screamingly bullish" right now. The Dow Jones/ gold ratio is teetering on the edge and about to lose its bullish signal. However, if the "sell in May" cycle and the U.S.-China trade war continue to weigh on stock markets, the Dow Jones/ gold ratio would continue to be bullish for gold. Stoeferle and Valek predict that the other three ratios will catch up after gold's trend reversal in the following few months.
Back to gold and the dollar
Just as they argued previously that the world's view of the dollar as the international currency of choice appears to be waning, they also believe the dollar's activity offers signals of its own into the technicals of gold. They noted that the yellow metal has "held up surprisingly well" even though the dollar has been strengthening over the last 14 months. Other sources noticed the same thing earlier this year.
Stoeferle and Valek said their model is throwing up a buy signal for the dollar, which means a bearish sign for gold. Real interest rates in the U.S. also remain around 1%, which is another argument against gold. However, the Consumer Price Index has begun to shift higher for the first time in six months, they add.
They believe that if this trend continues, lower real interest rates could actually drive higher silver and gold prices.
"Overall, the model is bearish and advises a neutral and patient stance until the typical summer low (normally to be found between end of June and mid of August)," they conclude. "Should gold not dive too deep until this low of the year, the sleeping more than 5,000-year-old golden dinosaur might indeed have enough power to break through the resistance around USD 1,360 and catapult himself towards USD 1,500 by spring 2020."
Other forecasts for the gold price
The forecasts included in the "In Gold We Trust" report aren't the only ones circulating this week. Billionaire Thomas Kaplan of Electrum Group predicted a gold price of $5,000 in an interview with Bloomberg. He also believes the yellow metal is just about to enter a new bull market lasting 10 years. Like Stoeferle and Valek, he predicts lower near-term gold prices, but in 10 years, he sees the precious metal trading at $3,000 to $5,000.
Standard Chartered predicts that the gold price will average $1,285 per ounce for the second quarter. The firm's precious-metals analyst also noted that demand from the world's central banks and from India continue to support the gold price.
On Friday the yellow metal received some support as global stocks, especially in Europe and Asia, sold off in early trading. After dipping below $1,300 an ounce, the gold price reversed again and began to head back toward that key price level.
Sharps Pixley predicts possible bull run in gold
June 18, 2019
According to Ross Norman (pictured), CEO, Sharps Pixley, a London-based bullion broker, gold could be in the very early stages of a bull run.
“We are seeing distinct similarities with the very early bull run in the late 1990s, just before we saw that inflection moment. There was massive despondency in the physical market for gold, increasing M&A amongst the miners and a market tracking sideways with falling prices and falling volatility.”
In the late 1990s the gold price reached its lowest level in real terms for two decades. Yet between 2000 and 2008, gold increased 16 per cent year-on-year and, between 2009 and 2011, it rose to 24 per cent year-on-year.
Norman believes that the gold price has formed enough of a base to break through USD1360 an ounce. “Everything changes once we break through USD1360; it is the mother of all resistance levels.
“In my view, in 2019 we will challenge that level. We have already reached USD1346, in February. Once we breach that, we should see a steady rise to around USD1800 an ounce.”
Until recently, investor demand for gold, particularly in the west was lacklustre at best. The strong US dollar made gold very expensive – gold is measured globally in US dollar terms – plus the continuing strength in the equity markets as well as rising interest rates in the US, kept the price of gold low.
But in 72 currencies, gold is at or close to an all-time high, states Norman. “Look at the Indian rupee, Canadian dollar and the Aussie dollar. This is often what you see in the early stages of a bull run in gold, where we start to see all-time highs - a stealth bull run if you like.”
Demand from central banks has risen exponentially too. In Q1 2019, central banks bought 145.5 tons of gold, up 68 per cent on the same period in 2018 which represents the strongest start to a year since 2013 according to the World Gold Council. Countries such as China and Russia who are extremely underweight gold have been adding to their reserves. “It looks to be the best year so far since 1967,” says Norman.
Not only that, Comex, a metals futures exchange, has seen strong gains. “The speculators who had previously been underweight gold, are now piling into the market. They have gone from being totally disinterested to average in one step which is a big move,” he adds.
“A combination of central bank buying, surging demand from institutional investors for gold ETFs and increased activity on Comex means that the mood is very positive towards gold. It’s only the retail investors that are late to the party,” adds Norman.
The Sharps Pixley CEO warns investors not to be swayed by noise, such as Trump, Brexit or the trade tariff talks and that it is important to look at the macroeconomic factors. “If the market is on the same lines as the late 1990s then we are likely to see double digit increases in the next two to three years,” adding, “But those looking to enter the market have to be patient.”
Gold Achieves Liftoff as Prices Rocket Toward $1,400 an Ounce
Until this month, gold held claim to the title of being one of the most boring asset classes. Prices barely budged and popularity was fading.
Now that’s all changed. Over the past few weeks, a clear bull case has started to emerge. A key resistance level has broken. Investors are pouring money into exchange-traded funds. The dollar is weakening and the Federal Reserve seems to be charting a path to cut interest rates. China is on a buying spree to stock up reserves.
“It has been a long wait,” said Mark O’Byrne, research director at GoldCore Ltd. “Gold has finally broken out, we nearly touched $1,400.”
Gold rose as much as 2.5% Thursday to the highest since September 2013, and traded at $1,381.64 an ounce at 1:03 p.m. in London.
Here are four charts that show why gold’s back in the spotlight:
Although gold has gathered some momentum in the past few weeks, it was the Fed’s comments Wednesday that triggered the latest spike. While the central bank left its key rate unchanged, it dropped a reference to being “patient” on borrowing costs. Lower rates boost the appeal of non-interest-bearing assets like gold.
Other central banks around the world are also adopting a more dovish tone, with European Central Bank President Mario Draghi saying earlier this week that additional stimulus may be needed if the economic outlook doesn’t improve.
After years of bumping up against the $1,350 an ounce level, gold may finally be succeeding in a breakout. The metal has breached a five-year resistance line in a dramatic surge that brought it within spitting distance of $1,400 an ounce.
Gold rallied alongside both haven and risk assets, underlining the shock impact of the Fed’s dovish statement and weaker dollar. While a pullback is possible when the dollar recovers, it will most likely be short and shallow, according to O’Byrne.
“Bond markets have been telling us for a while that things are not right -- economic data has confirmed it -- and now gold has given the negative view of the economy a 24-carat seal of approval,” said Ross Norman, chief executive officer of gold brokerage Sharps Pixley Ltd.
Investors are pouring into gold-backed ETFs again, following four months of outflows. Holdings tracked by Bloomberg have already seen the biggest monthly increase since January.
Bullion producers are also catching an uplift -- the $10 billion VanEck Vectors Gold Miners ETF, which tracks shares of gold mining companies, jumped to the highest in almost five months on Wednesday.
Central Banks Buying
In another bullish signal for gold, central banks are continuing to buy the metal as countries diversify their assets away from the U.S. dollar. China increased its reserves for a sixth straight month in May.
Other countries have also been buying -- first-quarter purchases were the highest in six years, with Russia and China the largest buyers, according to the World Gold Council.
Increasing Demand for Solar Panels affects Silver Prices
Posted on June 19, 2019 by Etisha for Xaralite
Solar power has been at the forefront of renewable energy solutions. With many adopting a completely solar lifestyle. Solar panels, therefore, are in high demand. Interestingly this, in turn, has increased the demand for silver, escalating the price of silver worldwide. The co-relation is simple; one of the most important components in the making of solar panels is silver. In fact, silver forms the core of the design.
Silver has the maximum thermal and electrical conductivity among all metals, which makes it solar friendly. With around 20g per panel which equates to around 6.1% of the total cost of the price of building each unit.
Researchers at Kent Business School, University of Kent, UK have set out to find out the causal effect between the rising cost of silver and the increasing demand for solar panels. In these dire earth hours, where solar energy has proven to be an excellent substitute, a shortage of its design can prove to be hazardous for the environment. The increasing cost of its core element stands a definite threat. This could dreadfully affect the production of solar panels unless the government interferes.
On one hand, the cost of installing solar panels could prove to be more expensive each day, on the other, finding cheaper but equally effective alternatives for silver could take a while longer, though studies are on the way to use aluminum and copper.
Energy credits or sales tax waivers to make them more cost-effective to encourage a transition to more renewable energy resources, by the government, could prove to be one of the fast track resolutions for this growing issue.
Why gold prices have climbed to their highest since 2013
Published: June 21, 2019 1:16 p.m. ET MarketWatch By Myra P. Saefong
Dovish statements from global central banks recently aren’t the only reason for gold’s rise past $1,400 an ounce this week to levels it hasn’t seen in nearly five years.
“Gold is a global market and U.S. monetary policy, while important, is not the only driver of performance,” Juan Carlos Artigas, director of investment research at the World Gold Council, told MarketWatch on Friday.
On the macroeconomic level, there’s “the combination of increase geopolitical tensions and a more accommodative monetary policy stance signaled by central banks, including the [European Central Bank] and the [U.S. Federal Reserve], which have pushed global interest rates lower,” he said.
U.S.-China tensions over trade policy persist as traders await an expected meeting and progress toward a resolution on the trade dispute, between U.S. President Donald Trump and Chinese President Xi Jinping at the Group of 20 leaders summit on June 28-29.
Meanwhile, Trump said Friday that he was prepared to conduct airstrikes against Iranian targets in retaliation for Iran’s move to shoot down a U.S. drone, but called off the strikes.
“Further tensions in the Middle East could bid gold prices higher through haven demand in the short term,” said Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, though “key factors in control of gold right now are rates and recession fears.”
Potential headwinds for gold would include any “hawkish signaling by the Fed or an immediate resolution to the trade war between the U.S. and China,” which would likely contribute to strength in the dollar, Gold said.
In Friday dealings, gold futures for August delivery GCQ19, +0.31% the most-active contract, was at $1,398.10.30 an ounce on Comex, after touching an intraday high of $1,415.40. Prices were trading at their highest levels since September 2013, according to Dow Jones Market Data.
The gold rally came as no surprise to George Milling-Stanley, head of gold strategy at State Street Global Advisors. “The only surprise in the recent gold moves was the absence of any significant profit taking by speculative interests as gold drove up through the $1,350 level.”
‘This move in gold has been many months in the making..’
George Milling-Stanley, State Street Global Advisors
He said he did not want to diminish the importance of apparent shifts in Fed policy toward a more dovish stance than earlier this year, but “this move in gold has been many months in the making.”
If gold develops enough momentum to attract speculators in significant numbers, prices may rise “considerably higher than $1,400 over the next six to 18 months,” he added.
Emerging markets have been key to gold’s rise, given the “resilience” of jewelry demand, continued strengthening in “pure” gold investment demand, and their recent significant increase in central-bank purchases of the metal, Milling-Stanley said.
“Elsewhere in the world, gold is being supported by growing nervousness over the prospects for equity markets after nine years of growth, coupled with increasing fears of recession, with bond markets offering confusing signals,” he said.
Gold has also found support from a technical perspective, according to Artigas. “Gold broke important multi-year resistance levels, and positioning in both futures and options had become increasingly bullish in recent weeks.”
Bullish sentiment has also been seen in net buying through gold-backed exchange-traded funds, with $3.5 billion in inflows worldwide month to date as of June 20, he said. On Friday, SPDR Gold Shares GLD, +0.63% traded up 0.5%.
Looking ahead, “we will have to wait and see how investors, both strategic and tactical, behave over the next few weeks to determine [the] strength of the rally,” Artigas said.
“Key trends to watch include developments in trade talks between the U.S., China and other nations, tensions with Iran, European politics—including Brexit—and forward guidance by the Fed and other central bank in terms of how monetary policy may be adjusted to those conditions,” he said.
Gold’s monster run could reach $1,600, say Citi analysts
Published: June 21, 2019 9:30 a.m. ET By BARBARA KOLLMEYER MarketWatch
Exhausted equity bulls look set to take a breather on Friday.
Who can blame them after a week filled with dovish slants from central banks, notably the Fed, that produced a fresh S&P 500 record. But stay alert for one more distraction. Stock-index futures, stock-index options, single-stock futures, and stock options will all expire simultaneously today, an event known as quadruple witching, that happens every quarter on the third Friday of the last month.
That can trigger volatility in the last hour of trading, but sometimes into the next week when it has coincided with an average loss of 1.09% for the Dow in 25 of the last 29 years, according to Jeff Hirsch, editor of the Stock Trader’s Almanac.
Away from equities, another herd of bulls are panting this morning. In the wee hours of Friday, gold GCQ19, +0.29% reached a fresh 2013 high of $1,415 an ounce, which was met pretty quickly by sellers. Gold has been on a monster run since the Federal Reserve hinted Wednesday that it could cut interest rates in the coming months.
As gold is seen as a defensive play, while it doesn’t pay a dividend or interest, it’s more appealing as an alternative lower-risk asset to hold when interest rates are low and investors are turned off by bonds.
That brings us to our call of the day from Citigroup analysts who say this “bullish gold fever is justified,” and say the metal could reach between $1,500 to $1,600 an ounce in the next 12 months, and $1,500 by end-2019 in the most optimistic of their new predictions for the metal.
Here’s what needs to happen: monetary policy expectations hit the zero lower bound level — when central banks cut interest rates to zero and have to find other ways to stimulate the economy — financial markets start pricing in expectations of more quantitative easing by those banks, and real U.S. interest rates sink into negative territory, says a team of analysts led by Aakash Doshi.
The analysts are generally upbeat on gold, which they see supported by worries about the global economy and trade and possible equity downturns.
They’ve also upped their near-term view. At the start of the year, Doshi and co. had a $1,400 target for gold over six to 12 months, but they now expect the metal to reach $1,450 within three months.