Gold Drifts Higher as Metal’s Uptrend Extends to Start Fed Week -- MarketWatch

By Mark DeCambre MarketWatch

Updated July 29, 2019 9:19 am ET | WSJ Pro

Gold futures edged higher on Monday as a key midweek policy decision by the Federal Reserve loomed.

 

August gold on Comex added $1.10, or 0.1%, to reach $1,420.30 an ounce, after the metal shed 0.5% last week based on the settlement for the most-active contract on July 19. It was the metal’s first weekly loss in the past three weeks.

 

Meanwhile, September silver was up 3 cents, or 0.2%, to $16.430 an ounce. Silver has been on a tear, registering a weekly gain of 1.2%, which follows a 6.3% weekly rise the week before.

 

The rate-setting Federal Open Market Committee is widely expected to cut rates by at least 25 basis points at the conclusion of its two-day policy gathering on Wednesday, even as recent data showed that the U.S. economy grew at a healthy annualized pace of 2.1% in the second-quarter, higher than the 1.9% pace forecast from MarketWatch polled economists.

 

Commodity experts will look to the Fed’s communications after its policy decision to help determine how assets, including gold, will trade. Policy makers are aiming to dull the impact of a trade clashes between the U.S. and China and signs of anemic growth in other parts of the globe.

 

The yellow metal has benefited from hope that the FOMC will reduce benchmark borrowing costs and signal a willingness to do what it takes to sustain U.S. economic expansion in a record-setting 11th year of expansion.

 

Lower rates and uncertainty about economic health has been a key ingredient for higher prices for precious commodities.

 

Some doubts about a China-U.S. resolution on trade also has factored into gold buying. U.S.-China trade talks are set to resume, with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer both arriving in Shanghai, marking the first formal tariff talks since May when President Donald Trump and Chinese leader Xi Jinping met in Osaka, Japan.

 

“From a technical point of view, the main trend remains positive for both precious metals; the silver rally, which started later than that of gold could go a lot further if the Fed confirms the dovish view expected by the market,” wrote Carlo Alberto De Casa, chief analyst at broker ActivTrades.

 

“A first positive signal for gold would be a recovery to the key area $1,430, while the following resistance area is placed at $1,450, the peak reached last week. A decline below $1,400 would add pressure on bullion, even if the positive mode will be switched off only by a stronger decline to below $1,360, he wrote.

 

Elsewhere on Comex, September copper added a penny, or 0.4%, to trade at $2.696 a pound, after closing Friday trade with a weekly loss of 2.5%. October platinum advanced $7.60, or 0.9%, to $875.40 an ounce, following a weekly advance of 1.8%. September palladium rose 20 cents, or less than 0.1%, to $1,531.20 an ounce. The commodity logged a weekly climb of 1.5%.

Industrial demand adding a sliver of shimmer on silver, invest in it

By Jayanta Roy Chowdhury Express News Service July 29, 2019 

Silver used as silver nitrate in photography at one time was a key driver for global silver demand.

The monsoons have been a particularly good period for silver. In the key London Metal Exchange, which sets the global standard for most metal prices, silver rallied more than 9 per cent since the start of July. In India, the metal traded for Rs 44,835 at the close of trading last week. 

As a bear hug seems to be embracing global markets, silver prices have been rallying worldwide. And the industrial demand for the white metal has increased with rising demand for smartphones, computers and digital televisions in markets like India and china, as silver is an excellent conductor of electricity. 

Fears that the US Federal Reserve may cut interest rates, along with fears of a recessionary phase enveloping both European markets and China, have prompted investors to seek a safe haven in bullion markets.

More so as the Gulf region may well be embroiled in another round of war-like games with Iran and the US squaring up for a face-off, with super tankers being intercepted and the US forces being sent to the Saudi Kingdom. Analysts predict that silver is going to be on an upswing in the near future and an investment in the metal may be a good option in a diversified portfolio. 

“With increasing industrial demand for silver, its price has been on an upswing. About half the production of silver is consumed for industrial uses unlike gold, where only 10-15 per cent is used for industrial purposes,” said Raman Chadda, a commodities trader.  

Silver used as silver nitrate in photography at one time was a key driver for global silver demand. This demand peaked in 1999 and then started to decline with the advent of digital photography. 

However, newer uses such as in electronics and in solar cells have taken up the mantle now. Despite thrifty use of silver in solar cells, global photovoltaic demand for silver has grown at a compound annual rate of 20 per cent over the last decade. 

A report on silver nanowire market by Global Market Insights Inc shows that the industry revenue is set to rise from $290 million in 2018 to around $1.5 billion by 2025.  

“Gold is a costly metal; silver by the gram is obviously cheaper, which is why many Indians invest in silver. For those who like the comfort of physical possession of metals, investment in silver has always been a good option, besides the option of placing orders for deliveries in the commodities market and then selling them,” points out Amit Bannerjee, an independent merchant banker representing several East Asian funds in India. 

Buying silver coins has been a favourite form of investment for many, as these are easy to procure at an affordable price and to keep in store either at home vaults or in banks. Accumulated silver coins can also be liquidated at short notice.

Besides reputed jewellers, banks have coin sales programme, which allows buyers to safely buy genuine silver coins. Net-based sellers like e-Bay and Amazon also allow sales and purchase of vintage silver coins such as those minted during the British Raj period or by Indian princes, which adds an antique value to coins’ intrinsic silver valuation. 

Those who have the money and want larger investments, silver bars may be considered for investment. Those who are not keen on keeping physical silver can invest in silver through the commodity market. The money invested would be slightly higher as compared to buying physical silver. Contracts can be sold before their expiry on a rise in value. However, this is a more speculative investment and only those who rack the commodities market well should indulge in it. 

Gold Fever Breaks Out in New ‘Bubble Game’ as Fed Preps a Cut

By Ksenia Galouchko July 29, 2019, 5:19 AM PDT

  • SocGen’s Bokobza touts bullion to protect risk-on portfolios

  • Yellow metal near six-year high amid demand for global havens

 

A top-ranked strategist at Societe Generale SA has a plan for clients fretting that a fresh wave of monetary easing will fan a bubble across assets.

Ride the bull until 2020 -- when a U.S. recession and a debased dollar will make gold the perfect doomsday hedge, says Alain Bokobza. It’s the latest warning for investors betting that the Federal Reserve will help extend the business cycle with stimulus this week, and a sign of how gold fever is breaking out from London to New York.

“Gold is the perfect response if you’re entering the bubble game,” the head of global asset allocation said in an interview in London. “Every time you have such a situation, gold has soared,” said Bokobza. His team ranks first among multi-asset strategists in the 2019 Extel survey.

Worrywarts have long clung to bullion as the ultimate store of value in a low-rate world, but the sentiment is growing as the global pile of negative-yielding debt sits near $14 trillion and central banks shift to dovish mode. Exchange-traded funds holding precious metals have taken in around $4 billion this year, while hedge fund Crescat Capital is starting a long-only strategy focused on mining stocks.

The SocGen strategist says bullion will defend traders against a weakening dollar, while providing a bulwark against a U.S. recession next year sparked by trade wars and a slump in corporate-profit growth.

“Gold is one of the most correlated assets to the U.S. dollar -- rising most of the time when the dollar falls, and thus a good hedge against a falling U.S. currency.”

The CEO of UBS Group AG warned last week of “dangerous” bubble risk spurred by central banks. For investors, the dilemma is that risk assets like stocks keep rallying to records even as fears grow over monetary impotence.

SocGen strategists were rewarded for their cautious outlook last year when easing economic momentum and higher U.S. rates adjusted for inflation spurred a sell-off across markets. But some of their bearish projections for 2019 have misfired as the S&P 500 surged to a fresh record.

“When momentum is so strong, it’s not so easy to go against it,” said Bokobza. “That’s why we haven’t recommended risk-averse asset allocation. But we have recommended assets that offer diversification.”

The team is underweighting equities, while overweighting government bonds and credit and holding about 5% cash. Commodities is at its 10% maximum weight.

Gold Fever

HSBC Holdings Plc recently reaffirmed gold’s role as a haven in a study, showing it’s one of the few reliably uncorrelated assets around. The commodity is trading near a six-year high as U.S. real yields decline.

“Precious metals are one of the few pockets of this market offering tremendous value to hedge against extreme monetary policies, bursting asset bubbles, and record global leverage,” Kevin Smith, chief investment officer at Crescat, wrote in a recent investor letter.

He calls precious metals “incredibly undervalued” relative to other assets. Smith is also bullish on miners, which tend to outperform the underlying commodity but which trade at a discount to global equities. The VanEck Vectors Gold Miners ETF is down more than 10% over the past three years compared to a gain of about 30% for the MSCI World.

“A new awareness of global fiat currency debasement polices is now in its early stages,” Smith wrote. “Gold should become a core asset for those who believe in this macro development.”

— With assistance by Eddie van der Walt

Gold extends climb, on pace for longest string of gains in 5 weeks

By Mark DeCambre Published: July 30, 2019 9:06 a.m. ET

Key resistance level for gold at $1430.80 an ounce.

Gold futures headed higher for a third consecutive session on Tuesday as investors watched for the start of an important Federal Reserve meeting and digested U.S. economic data which indicated muted domestic inflation.

August gold on Comex GCQ19, +0.37% added $7.10, or 0.5%, at $1,427.50 an ounce, after gaining 0.1% a day ago. A third straight climb for the precious commodity would mark its longest such streak since a four-session advance ended June 25, according to FactSet data.

Chintan Karnani, chief market analyst at Insignia Consultants said a key resistance level for gold — one that it has struggled to extend firmly above — stands at $1430.80 an ounce. “Gold needs to trade over $1430.80 for the rest of the day to rise to $1442.30 and $1452.70,” he wrote in a Tuesday research note.

Meanwhile, September silver SIU19, +0.24% gained 5 cents, or 0.3%, to reach $16.50 an ounce.

U.S. personal-consumption expenditures, a measure of household spending, increased a seasonally adjusted 0.3% in June from the prior month, the Commerce Department said Tuesday.

The report showed inflation, a key measure of economic health for the Fed, was muted. The personal-consumption expenditures, the Federal Reserve’s preferred inflation measure, rose 0.1% in June and was up 1.4% from a year earlier.

The rate-setting Federal Open Market Committee is widely expected to cut rates by at least 25 basis points at the conclusion of its two-day policy gathering on Wednesday.

The yellow metal has benefited from hope that the FOMC will reduce benchmark borrowing costs and signal a willingness to do what it takes to sustain U.S. economic expansion in a record-setting 11th year of expansion.

Gold Bulls Look Beyond the Fed as Global Risks Proliferate

By Joseph RichterJustina Vasquez, and Marvin G Perez July 30, 2019, 3:00 PM PDT Updated on July 31, 2019, 5:16 AM PDT

  •  Bullion market looks for assurance on further rate reductions

  •  Geopolitical issues, trade tensions also supportive, HSBC says

Gold bulls are betting there’s more to the metal’s rally than rates.

Bullion is on its way to a third straight monthly gain, trading near a six-year high as central banks signal easier monetary policy. The Federal Reserve is expected to cut U.S. interest rates by a quarter percentage point on Wednesday. Gold analysts and traders are looking for affirmation from Fed Chairman Jerome Powell that further reductions are in store to justify the run-up, with some saying the precious metal may have gotten ahead of itself.

“The market can easily pull back in the wake of a cut without the overall gold rally being altered, and that’s quite likely,” said James Steel, chief precious metals analyst at HSBC Securities (USA) Inc. “Trade issues are probably still going to be supportive. The general geopolitical background is supportive, and we could see some financial market volatility, which would likely be helpful for gold” on safe-haven buying.

With gold futures trading little changed near $1,443 an ounce hours ahead of the Fed’s decision, the following charts show the broader bullish case for owning bullion:

Haven Demand

Gold is benefiting as signs of slowing economies fuel demand for the metal as a haven asset. There are indications that things could get worse before they get better for global growth. The International Monetary Fund further reduced its outlook, already the lowest since the financial crisis, saying the projected pickup in 2020 is “precarious.” Singapore may underscore the IMF’s case, with economic data deteriorating in the export-reliant country, raising the risk of a recession in the former tiger economy.

A Fed Bank of New York gauge puts the risk of a U.S. recession in the next 12 months at the highest since 2008, and Societe Generale SA says bullion provides a bulwark against a recession next year sparked by trade wars and a slump in corporate-profit growth.

Industrial-Strength Weakness

Economies worldwide are under continued strain from slowing industrial demand. China’s purchasing managers’ index on Wednesday remained in contractionary territory as pressures on exporters persist. A similar gauge in Europe slipped last week, driven by shrinking factory output in Germany and France.

“Powell, talking about what’s going on with growth, said it’s more than just trade, that there’s something else going on,’’ Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, said in a Bloomberg TV interview earlier this month. “From our vantage point, it’s all about a cyclical downturn in industrial growth, including China. And it’s not over in China. That industrial downturn is continuing.’’

Comfort in Conflict

Gold in June posted the biggest monthly advance since the U.K. voted to leave the European Union three years ago. Concerns over Brexit continue to fester. A host of other potential trouble spots are now adding to the global acrimony, keeping investors awake at night. Those include unrest in Hong Kong, tensions over the Strait of Hormuz, and global trade frictions showing signs of spreading beyond the Trump-China fracas.

Bullion’s gains have come even amid strength this month in the dollar, which can often diminish the appeal of the metal.

“It’s because there’s a high level of uncertainty,” HSBC’s Steel said. “There are many improbables that I think a lot of the market can’t get a grip with, and in a case like that, increasing your gold holdings is probably a judicious thing to do because it is one of the few things you can buy that is liquid and is on nobody else’s credit.”

Earlier this month, hedge funds and other large speculators boosted their bullish position in U.S. gold futures and options to the highest since September 2017, government data show. Billionaire investor Ray Dalio, the founder of Bridgewater Associates, said in a LinkedIn post that he sees a “paradigm shift’’ in investing coming in the next few years.

Assets “that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold,” Dalio said in the post.

Set to Cool?

Not all investors are convinced gold’s rally will stick after the Fed’s decision on Wednesday.

John LaForge, the head of real asset strategy at Wells Fargo Investment Institute, which oversees $1.9 trillion, said he’s expecting prices to cool because the market “is baking in too much negative-yielding debt in the future.’’

“I believe that Fed rate cuts are built into the price of gold and that it is overvalued,” LaForge said by phone. “If the Fed disappoints, or even if gold buying backs off because Fed cutting is now in the cards, I’d suspect that gold will back off to the mid-$1,300s and reset investor expectations.’’

Kristina Hooper, chief global market strategist at Invesco Ltd., which oversees $1.2 trillion, said that while the gold market “may be getting ahead of itself,’’ she remains positive on the metal.

“When central banks are looking to buy assets, they are running out of options,’’ she said in an interview. “It’s like the person who’s got everything: what to get the central bank that’s bought everything? Gold is still an asset class they will look to."

— With assistance by Ksenia Galouchko

Why Silver Will Be a Better Bet Than Gold if the Precious Metals Rally Continues

The white metal is far more volatile and that can be used as an advantage by savvy investors.

Simon Constable Updated Jul 31, 2019 9:26 AM EDT

Anyone bullish on precious metals should consider silver instead of gold.

The white metal tends to see far more volatility, which is an advantage for traders in an up-trending market. Plus, silver prices are still playing catch-up with gold based on historical price analysis.

When you invest in anything, you need to consider how to make volatility work for you.

In a bull market, volatility is okay as long as it is upward trending volatility, which is exactly what we see right now in the precious metals market. In such a case, savvy traders should take a more volatile route.

"Precious Metals bulls are one thing, but Silver bulls are on a whole other level," writes JC Parets, founder or technical analysis firm AllStarCharts and an expert in reading price charts. "When Metals market participants are bullish, they'll be buying Silver for the exact same reasons equity bulls buy Small-Caps."

As Parets explains, silver tends to outperform gold when the market is moving up, just like small caps frequently outperform large caps in an equity bull market.

In fact, we already see some of this action. Over the past month, the iShares Silver Trust ETF has jumped 9%, while the SPDR Gold Shares (GLD - Get Report) ETF, which tracks gold prices, has risen 3%, according to data from Yahoo.

Product of Being a By-Product Metal

Part of the reason that silver is more volatile than gold is that supply of the metal tends not to move that much in response to price changes.

When most commodity prices move up or down, the producers tend to change how much of the stuff they produce. When the price of copper falls, for example, so may output, and vice versa.

But silver is a rare exception.

That's because silver production is overwhelmingly the result of miners pursuing other minerals such as gold and copper. In 2018, 74% of silver production was the result of this so-called secondary production, according to the Silver Institute.

When gold and copper miners make decisions to increase or decrease their mining activities, they look at the price of copper or gold, not the price of silver.

The net result is that silver supplies don't jump around much in response to changing prices. That can make a silver rally much bigger than a gold rally.

The Gold-Silver Price Ratio

Silver prices are also low now when compared to gold using something known as the gold-silver price ratio. Currently one ounce of gold trades for 87 times the value of one ounce of silver. 

Historically, that ratio has been in the range of 40 to 80, says Matthew Miller, a mining analyst at New York-based research firm CFRA. Or in other words, gold is now trading at a premium valuation to silver based on history.

That doesn't mean gold prices are going to drop -- this time at least.

Miller says gold should hit $1,500 a troy ounce by the end of the year, up from $1,430 recently. The reason for that is multifaceted, but some of the major catalysts are U.S.-China trade-war worries, rising inflation and other geopolitical uncertainties.

Such a move should help lift silver prices as well. But the white metal could get a double lift if it were to trade at the historical gold-silver ratio of say 60, versus the current 87.

If that happened, then silver could fetch $25 an ounce, says Miller, up from its current price of roughly $16.40.

"Even at the more conservative 80 ratio, then you are still looking at $18.75," Miller says. 

That would mean gold would rally 4% to $1500 while silver would rally 14%.

"That's still a decent return," Miller notes.

BlackRock’s Gold ETF Holdings Climb to a Record High

By Justina Vasquez July 31, 2019, 9:15 AM PDT Bloomberg

Signs of increasing investor appetite for gold just keep piling up.

On Tuesday, investors poured the most money into BlackRock’s iShares Gold Trust since April 2011, taking the exchange-traded fund’s bullion holdings to the highest ever. Assets in long-only ETFs linked to the precious metal totaled $111 billion this month, the most in more than six years, according to data compiled by Bloomberg Intelligence.

 

Money has been pouring into gold as investors seek to protect their wealth amid mounting concerns of slowing global growth that are seen spurring monetary easing from central banks around the world. On Wednesday, the Federal Reserve is widely expected to cut U.S. borrowing costs for the first time in more than a decade, making non-interest bearing bullion more competitive against other assets.

Since the end of April, gold has rallied 11% in the spot market, outpacing the 2.4% rally in the S&P 500 index. Bullion is on course for its biggest three-month gain since April 2016.

Gold Rallies on Safe Haven Demand

Updated Aug. 2, 2019 9:02 am ET | WSJ Pro

08:58 ET - Gold was recently up 1.2% at $1,449.10 a troy ounce, hovering close to six-year highs hit earlier this month. While this morning’s in-line employment data for July doesn’t exactly argue for more Fed easing, the metal is getting a boost from concerns regarding President Trump’s plans to slap new tariffs on Chinese imports, which has roiled markets. Silver, palladium and platinum--precious metals that are used in manufacturing and tend to be pressured by trade worries--are all down this morning. (ira.iosebashvili@wsj.com)

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