Gold edges higher as trade-war worries continue

Published: Aug 12, 2019 9:53 a.m. ET

By WILLIAM WATTS DEPUTY MARKETS EDITOR

Gold futures edged higher Monday, trading near a six-year high above $1,500-an-ounce set last week, as the U.S.-China trade battle continues and global investors focus on political demonstrations in Hong Kong.

December gold GCZ19, +0.50%  on Comex rose $7.40, or 0.5%, to $1,515.80 an ounce, while September silver SIU19, +0.23%  was up 1.9 cent, s or 0.1%, at $16.95 an ounce.

“Gold is thriving in the current environment of central bank easing, risk aversion, recession risks, low inflation and even a slightly softer dollar this month. It’s already soared back above $1,500 for the first time in more than six years and it’s not yet losing momentum,” said Craig Erlam, senior market analyst at Oanda, in a note.

Goldman Sachs, in a Sunday note, said the U.S.-China trade war is having a bigger effect on the U.S. economy than they had expected and warned that recession risks had risen.

The yellow metal ended with a minor loss on Friday, but logged a 3.5% weekly rise, the strongest since June 21. Stock-market volatility around U.S.-China trade tensions were credited with lifting haven assets, including gold. The potential for early elections in Italy and continued worries over protests in Hong Kong, have also provided support.

Chinese authorities condemned weekend protests as “the first signs of terrorism” and vowed a crackdown on demonstrators. Authorities canceled outgoing flights from the city’s airport after it was thronged by protesters.

Erlam said it could be argued, however, that the bullish gold trade is becoming “a little crowded.” Until momentum starts to wane, however, “there’s every chance it will continue to thrive,” he said. “Especially if central banks continue to facilitate it with more easing heading into year-end.”

In other metals trade, October platinum PLV19, -0.57% fell 90 cents, or 0.1%, to $862.90 an ounce, while September palladium PAU19, +0.32%  rose $3.20, or 0.2%, to $1,422.50 an ounce.

September copper HGU19, -0.19%  was up 0.6 cent, or 0.2%, to $2.595 a pound.

 

Hedge Funds Go All In on Gold as ‘Currency Wars’ Lift Haven Buys

By Justina Vasquez August 9, 2019, 1:40 PM PDT Updated on August 12, 2019, 6:29 AM PDT

  • Bullish wagers hit three-year high as Goldman, Citi see gains

  • Holdings in bullion-backed ETFs are largest since 2013

Gold’s spectacular rally is just getting started if hedge funds have their way.

Prices are already at the highest in more than six years, and Goldman Sachs Group Inc. and Citigroup Inc. predict bullion could climb about 6% to $1,600 an ounce in as little as six months. Money managers are going all in, raising their wagers on a rally to the highest since 2016.

Gold’s value as a haven is shining amid mounting global uncertainty over the U.S.-China trade war and slowing economic growth. Donald Trump has escalated his spat with Beijing, and his Treasury Department formally labeled China a currency manipulator. Trump has also pressed for the Federal Reserve to further cut interest rates and weaken the dollar. Meanwhile, $15 trillion of debt globally has negative yields, and investor demand shows no sign of abating.

“We’re now going from trade wars almost into currency wars,” said Whitney George, president of Sprott Inc., a precious metals-focused fund. “Gold is a currency, but it’s nobody’s obligation, so it will stand tallest when everyone else is trying to debase their currency to be competitive globally.”

In the week ended Aug. 6, hedge funds increased their gold net-long position by 23% to 285,082 futures and options, according to U.S. Commodity Futures Trading Commission data published Friday. The holding, which measures the difference between bets on a price increase and wagers on a decline, was the highest since July 2016. The move came as long-only holdings also hit a three-year high, while short wagers fell for a third straight week.

Gold futures for December delivery gained 3.5% in the week ended Friday to settle at $1,508.50 on the Comex in New York. Prices rose 0.5% Monday to 1,515.30.

Analysts from Goldman have a six-month gold forecast of $1,600, and Citi has said it will rise to that level in six to 12 months. Bank of America Merrill Lynch sees prices climbing toward $2,000 within two years, topping the all-time record of $1,921.17 reached in the spot market in 2011.

Even so, prices may not have a straight ride up. The CBOE/Comex Gold Volatility Index, a measure of price swings, recently touched the highest since December 2016. The measure is still less than half of what it was when bullion climbed to its record in 2011.

Investors seem willing to endure the volatility in hope of more price gains. Holdings in global exchange-traded funds backed by the metal are at the highest since March 2013. Aberdeen Standard Physical Gold Shares ETFpassed the $1 billion mark last week, making it the U.S.’s third-largest gold ETF, with $1.02 billion in assets under management.

Meanwhile, traders and analysts have switched to a strongly bullish position, with 69% expecting price gains, and none bearish for the first time since March, according to a Bloomberg survey.

“When we have global deflation concerns and the slowdown in global economic activity and governments are all running to devalue their country’s currency to try to stimulate economic growth, they’re dealing with negative interest rates, and that’s been driving gold,” said Frank Holmes, chief executive and chief investment officer of U.S. Global Investors, which runs the U.S. Global GO GOLD and Precious Metal Miners ETF -- the third-best performing non-leveraged equity ETF in the U.S. so far this year.

Bank of America raises chance of a recession to 1-in-3 in the next 12 months

August 12, 2019 Maggie Fitzgerald@MKMFITZGERALD

KEY POINTS

  • Bank of America sees a greater than 30% chance of a recession in the next year, based on recent data.

  • Some economic indicators are “flashing yellow,” signaling a coming recession.

  • Economist Ethan Harris says the “bright spot” of the economy is that initial jobless claims remain at low levels.

Recession risk is rising, according to Bank of America.

Based on the most recent data, the bank’s global economist now sees a greater than 30% chance of a recession in the next year.

“Our official model has the probability of a recession over the next 12 months only pegged at about 20%, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance,” Bank of America global economist Ethan Harris said in a note to clients Monday.

Uncertainty around the U.S.-China trade war and a global economic slowdown have caused interest rates to tumble and weighed on the major stock averages in recent weeks. Last month’s jobs report showed a strong consumer, but business investment is low as investors and business owners juggle new tariffs and fiscal policy uncertainty.

Harris said some economic indicators are “flashing yellow,” signaling a coming recession.

For one, the yield on the 10-year Treasury yield dipped below the yield on the 3-month, inverting part of the yield curve. This inversion, although a recession indicator, is not as worrisome as an inversion of the 2-year yield and the 10-year yield, which has yet to occur.

Harris also said that three of five economic indicators that track business cycles — auto sales, industrial production and aggregate hours worked — are at levels reached right before previous recessions.

Harris said the “bright spot” of the economy is that initial jobless claims remain low.

—With reporting from CNBC’s Michael Bloom.

The New Gold Rush: Just How High Can Gold Prices Go?

NANCY GONDO 8/12/2019 Investor's Business Daily

Investors seeking a safe haven from the volatile stock market as trade war and global growth concerns persist are chasing the latest gold rush.

Gold prices last week topped $1,500 an ounce for the first time in six years, fueling gold ETFs to levels not seen since spring 2013. On Monday, gold rose 0.9% to $1,522 an ounce. And some analysts think they could keep rising.

Goldman Sachs last week boosted its three-month and six-month gold price forecast to $1,575 and $1,600 an ounce, respectively.

"If growth worries persist, possibly due to a trade war escalation, gold could go even higher, driven by a larger ETF gold allocation from portfolio managers who still continue to under-own gold," Goldman said in a note Wednesday. "Gold ETFs have recently built momentum almost as strong as in 2016, and we believe that can be maintained in the short term."

Gold Vs. Bonds

Trade war fears aren't the only reason for gold's recent outperformance. Investors tend to flock to bond funds when they're nervous about the stock market. But global bond yields at or near record lows make gold look more attractive, since the precious metal is a zero-yield asset. In Europe and Japan, bond yields are negative, which means lenders pay to lend borrowers money.

The rush to gold fueled global gold-backed ETFs last month to their highest level since March 2013, according to the World Gold Council. They saw net inflows of U.S. $2.6 billion across all regions, adding 52 metric tons to 2,600 metric tons.

"Last month's flows continued the positive trend that had started in mid-May as uncertainty rose — whether from economic concerns, trade tensions or geopolitical risks — and global monetary policy started to shift to a more accommodative stance," the World Gold Council said in its latest report. "As the gold price in U.S. dollars increased by an additional 1.3% in July, global assets under management rose 3.4% to U.S. $119 billion."

Gold purchases by global central banks have also boosted gold, as the banks seek safety amid trade war and geopolitical tensions.

Gold Resumes Rise as Main Yield-Curve Measure Inverts -- MarketWatch

Gold for December delivery on Comex rose $8.80, or 0.6%, to $1,522.90

By William Watts MarketWatch Updated Aug. 14, 2019 9:17 am ET | WSJ Pro

Gold futures rebounded Wednesday after another round of downbeat economic data and the inversion of the main measure of the U.S.

Treasury yield curve, a phenomenon seen as a recession indicator.

Gold for December delivery on Comex rose $8.80, or 0.6%, to $1,522.90 an ounce, while September silver was up 17 cents, or 1%, to $17.155 an ounce.

 

The yield on the 10-year U.S. Treasury note traded below the yield on the 2-year note, marking an inversion of the most closely followed measure of the curve. The 3-month vs. 10-year measure of the curve has been inverted since earlier this year.

 

U.S. stock-index futures extended losses after the curve inverted, while gold appeared to find a lift on haven-related buying. Gold had retreated Tuesday as stocks soared following the Trump administration’s decision to delay some tariffs on imports from China that had been scheduled to go into effect on Sept. 1.

 

“Sure, the yellow metal fell a few percent on the [tariff] announcement but it’s already back above $1,500 and looks relatively undeterred,” said Craig Erlam, senior market analyst at Oanda, in a note. “The central bank environment right now is clearly aiding this unwavering belief in the rally and perhaps this just isn’t viewed as the game changer for interest rates as it maybe is for the U.S. holiday period.”

 

Gold’s haven appeal was also reinvigorated by downbeat global data.

 

China said industrial output saw a 4.8% year-over-year rise in July, slowing from a 6.3% increase in June. Retail sales in China rose 7.6% year-over-year, decelerating from 9.8% in June and coming in below forecasts for 8.5% growth.

 

Data showed the eurozone economy slowed to a 0.2% growth rate in the second quarter, according to Eurostat, which also reported a 1.6% decline in industrial production. Germany, the eurozone’s largest economy, saw gross domestic product shrink by 0.1% in the second quarter from the previous three months as global trade tensions and a troubled automotive sector weighed.

 

September palladium fell $20, or 1.4%, to $1,431.50 an ounce, while October platinum was off $5.50, or 0.6%, at $854.20 an ounce.

 

September copper fell 3.3 cents, or 1.3%, to $2.597 a pound.

Gold basks as recession fears send investors in search of safety

15 AUGUST 2019 - 07:49 BRIJESH PATEL

Gold prices rose on Thursday, as investors flocked to safer havens after an inverted US bond yield curve pointed to new recession fears following poor economic data from Germany and China.

Spot gold was up 0.2% at $1,519.18 at 3.13am GMT. On Tuesday, gold prices scaled their highest level since April 2013 at $1,534.31.

US gold futures gained 0.2% to $1,530.50/oz.

 

“We are seeing flight to safety, market confidence is a bit shaky. We have been seeing that the economy is showing signs of weakness and it’s starting to slow in the second half of this year,” said Benjamin Lu, an analyst at Phillip Futures.

 

“A successful breakout at $1,525 per ounce will see gold bulls make an attempt on previous highs of $1,535.”

 

Yields on 10-year US Treasury notes fell below the two-year yield, intraday, for the first time since 2007. The inversion, which has historically signalled a looming recession, triggered an extensive flight to safety.

 

Fears of a global recession gripped financial markets around the world as stocks slumped to more than two-month lows on Thursday, tracking a Wall Street slide.

 

“We have continued safe-haven buying with stock markets looking pretty wobbly ahead of US retail sales data, which is really important,” Oanda analyst Jeffrey Halley said.

 

“The US is the last man standing amongst Europe and China. We could see an outsized reaction overnight if data comes in ugly, which should help gold again.”

 

Economic data from China and Germany suggested a faltering global economy, hit by the worsening US-China trade war, Brexit and geopolitical tensions.

 

Gold, which pays no interest of its own, is often used as a hedge against political and financial risks.

 

Markets are anticipating US retail sales data due later in the day, which could serve as an indicator of the strength of the world’s largest economy.

 

On the trade front, senior US officials said on Wednesday that China has made no trade concessions after the US delayed tariffs on some Chinese imports, the latest sign that the trade saga is going nowhere.

Investors are focused on the Federal Reserve’s annual symposium next week. Traders see a 63.7% chance of a 25-basis-point rate cut by the Fed in September.

 

Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

 

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.9% to 844.29 tons on Wednesday.

 

Among other precious metals, silver rose 0.6% to $17.30/oz.

 

Platinum gained 0.54% to $845/oz and palladium climbed 0.7% to $1,434.41/oz. 

Reuters

UBS: Gold To Reach Almost $1,700 Next Year

Simon ConstableContributor Investing

Gold prices could rally more than 10% in the next 18 months, a new report says.

The bullion bounce surge, which has taken off this month, will continue to be propelled by mounting investor worries, according to Swiss bank UBS.

"Gold is set to gain as recession, trade and geopolitical risks rise, and yields fall," the report states.

An ounce of the metal, which recently fetched $1,520 could rally more than 10% to $1,680 in 2020, the usually-conservative bank says.

Prices for the metal have moved between $1,100 and $1,300 an ounce for most of the last five years, according to data from Bloomberg.

But that lackluster price movement is all over now.

Uncertainty boosts prices

 

The UBS report highlights increased uncertainty across the globe as the catalyst for the recent and likely continued increase in the value of the yellow metal. The report states:

It is becoming increasingly challenging for market participants to anticipate and plan for the future. In this environment of rising uncertainty and falling opportunity costs of holding gold, the yellow metal stands out as a clean way to take a strategic position both for institutional investors as well as the official sector [meaning central banks.]

In other words, when nothing seems certain investors suddenly catch the gold bug. That is also helped by ultra-low interest rates which make the real or inflation-adjusted costs of holding bullion inconsequential.

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