Precious Metals News Roundup

Week of October 14- October 18, 2019

Dutch Central Bank: World Will Need Gold if Entire System Collapses

 

Fiat money will become inferior to gold in the event of a total collapse of the world’s financial system, one of Europe’s central banks has said.

Gold will rescue the economy from “collapse”

In comments which have caught critics of fiat by surprise, the Dutch Central Bank, known as De Nederlandse Bank (DNB), said gold would be indispensable in the event of a fiat meltdown.

Retweeted on social media on Oct. 13, a statement from the bank’s website describes gold as “the trust anchor for the financial system.” 

“If the entire system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet. That gives a safe feeling,” it continues.

Sound arguments

While it is known that central banks have begun buying up gold since the 2008 financial crisis, it is the DNB’s phrasing that has excited Bitcoin (BTC) proponents in particular. 

As a form of sound money with the highest stock-to-flow ratio of any commodity, gold previously ensured the sound functioning of economies before governments uncoupled their national currencies from its backing over the last century. 

Since then, as Saifedean Ammous noted in his popular book, “The Bitcoin Standard,” telltale signs of decay have plagued most countries’ economies.

Central banks, notionally in charge of fiat currencies, use interventions to manipulate their supply artificially, something which is all but impossible to do with gold due to its stock-to-flow ratio. 

This championing of the precious metal’s qualities over paper money thus did not go unnoticed among Bitcoin figures.

“It’s an established central bank! Speaks to the times we live in,” Gabor Gurbacs, digital asset manager at VanEck, tweeted in response to DNB.

He continued:

“I firmly believe that private/non-sovereign moneys have a place in our world. Private moneys should be allowed to compete in the free market with central bank moneys.”

Novogratz: Current economic climate bullish for decentralized “digital gold”

Later, serial investor Mike Novogratz struck a similar tone, telling CNN that both gold and Bitcoin, as sound money, would benefit from current fiat trends.

“We’ve got geopolitical uncertainty, we’ve got negative rates; it’s all bullish for gold and bullish for Bitcoin,” he said in an interview on Oct. 11.

Not everyone agrees, however. As Cointelegraph reported, Apple CEO Tim Cook claimed earlier this month that only governments should control money.

He was speaking within the context of the ongoing difficulties Facebook is encountering with the release of its planned digital currency, Libra. Apple, he said, would not seek to follow its lead.

Around the same time, Germany’s finance minister likewise said that states should be in control of monetary activities.

Past utterances from the DNB meanwhile have dismissed cryptocurrencies, claiming they do not fulfill the functions of money at all.

Gold prices rise as the Fed announced the start of a ‘massive’ bond buying program

Published: Oct 14, 2019 10:39 a.m. ET

Gold futures rose Monday, looking to post their first gain in three sessions, finding support as the so-called “phase one” of the U.S.-China trade deal reportedly hit a snag and after the U.S. Federal Reserve announced last week that it will start expanding its balance sheet next week.

“The focus on Friday was on the China-U.S. trade deal, which appears to be in limbo pending further talks,” Peter Spina, president and chief executive of GoldSeek.com, told MarketWatch.

Wariness over the strength of an agreement hammered out between the U.S. and China last week was growing on Monday after a report that Beijing will insist on more talks with the U.S. before signing any such deal.

As big as the trade talks news was on Friday, it was “a giant distraction from the real news,” said Spina. “In a very quiet and sneaky way, the Federal Reserve announced the start of a massive bond buying program.”

The Fed, in a surprise announcement, set in motion a plan Friday to ease unexpected strains seen in short-term money markets last month.

On Comex, December gold GCZ19, +0.50%  climbed by $5.70, or 0.4%, to $1,494.40 an ounce. On Friday, it posted its lowest finish month to date and the most-active futures contract lost 1.6%.

Despite the size of the bond buying program, “the Fed does not wish for us to refer to it as quantitative easing or QE4,” said Spina. “Yet, this is exactly what the Fed is doing but due to the timing and enormity of the program.”

“I believe fund managers and investors are going to have time this weekend and this week to digest this very secretive-like news from the Fed on this massive debt monetization scheme,” said Spina, noting that he does not see gold falling below $1,450, “where excellent support exists and instead, gold should be working through this consolidation phase which will take it to record levels in the coming several months.”

“Right now it is a question of timing,” he said.

Rounding out action in Comex metals, December silver SIZ19, +0.69%  added 10.6 cents, or 0.6%, to $17.65 an ounce, while December copper HGZ19, +0.04%  shed 1.1 cents, or 0.4%, to $2.617 a pound.

January platinum PLF20, -0.21%  added $1.30, or 0.1%, to $901.60 an ounce and December palladium PAZ19, +0.48%  rose $1.60, or 0.1%, to $1,671.70 an ounce.

Silver Glitters in India as Record Prices Dull Gold’s Luster

By Swansy Afonso October 10, 2019, 9:05 PM PDT

  • Silver imports surge 72% from year ago to 543.21 tons in Aug.

  • Inbound gold shipments plunge to three-year low, data shows

Silver is outshining gold in India.

Imports of the poor man’s gold jumped 72% from a year earlier to 543.21 tons in August, according to the latest available data from India’s trade ministry. In contrast, inbound purchases of gold plunged by an equivalent amount to 32.1 tons, the lowest in three years, as record high prices sapped demand in the world’s second-biggest consumer of the metal.

Gold has gained about 18% this year as the U.S.-China trade war hurts global growth and central banks loosen policy. In India, benchmark gold futures in Mumbai rose to record highs last month, while silver futures, though up 18% in 2019, are still almost 40% away from an all-time high in 2011.

The metal, at around 45,900 rupees ($646) a kilogram, is about eighty times cheaper than gold and far more affordable as an investment or the token bullion purchases Hindus consider auspicious in the run-up to the festival of Diwali later this month.

“The price point is so much lower that things are working in the favor of silver,” according to Chirag Sheth, a consultant at London-based Metals Focus Ltd. “It is still very, very reasonable to buy silver compared to gold.”

Wider use of silver including in electrical components and for religious occasions and weddings is boosting consumption, he said. In addition, for silver “the whole market structure has changed,” as designs have evolved and “are more in line with what millennials want.”

While silver imports may moderate in the remaining months of the year as a slowdown in the economy weighs on consumption, demand will still be better than for gold, Sheth said. Hindustan Zinc Ltd. is the only silver producer in the country, which ships in most of the gold and silver it consumes.

“When we talk to people in the market, they say Diwali is going to be bad for gold but for silver it is going to be okay,” Sheth said. “It’s not so bad.”

Gold Set to Extend Rally as Retail Investors Climb on Board

By Ranjeetha Pakiam October 14, 2019, 6:22 PM PDT Updated on October 14, 2019, 11:15 PM PDT

  • Bullion will benefit from safe haven flows, StanChart says

  • HSBC sees year-end prices at $1,555/oz, end-2020 at $1,605

The next push in gold prices will come from retail investors as risks remain skewed to the upside, according to Standard Chartered Bank.

Having already rallied to the highest in more than six years, bullion will still benefit from safe haven flows, according to Suki Cooper, precious metals analyst at the bank. Prices will average $1,510 an ounce in the fourth quarter of 2019 and $1,570 in the same period next year, she said.

Bullion is up 16% this year as central banks lower borrowing costs and global growth drags amid the prolonged U.S.-China trade war, boosting demand for haven assets. While some risk appetite returned to markets with the two countries agreeing a partial trade accord last week, investors continue to add to exchange-traded funds backed by the metal, with holdings closing in on record levels previously seen in 2012.

“Although we’ve seen ETF holdings and tactical investment hitting elevated levels, like peak highs, we think retail demand is really going to be what drives the next leg higher,” Cooper said in an interview. “Retail investors almost want confirmation of further rate cuts, some weakness in the equity markets before they move into gold. The next leg higher in 2020 is going to be led by the retail side.”

Tactical Investors

A similar trend occurred in 2011, when the initial push higher was driven by ETF flows and tactical investors, but retail demand didn’t respond for another 12 to 18 months, Cooper said. While progress on trade talks has triggered near-term profit-taking in gold, which could continue as risk appetite returns, the longer-term price risks are skewed to the upside, she added.

Spot gold was steady at $1,493.75 an ounce on Tuesday, following last month’s rally to $1,557.11, the highest level since 2013. Prices touched a record of $1,921.17 in September 2011.

High prices have hit consumer demand, particularly in emerging markets. China’s jewelry consumption is forecast to drop 4% to about 660 tons this year, according to forecasts from Metals Focus Ltd. Gold imports by India plunged in September to the lowest monthly inflow in at least three years.

Cooper is set to speak at a price-forecasting session at the London Bullion Market Association’s Global Precious Metals Conference Tuesday, while James Steel, chief precious metals analyst at HSBC Securities (USA) Inc., will wrap up and review the annual event held in Shenzhen, China this year.

Gold will end the year at $1,555 and close out 2020 at $1,605, said Steel, citing easier monetary policy globally, low yields and geopolitical risks as supportive factors. Both HSBC and StanChart see one more interest rate cut by the Federal Reserve this year.

While Steel sees two major headwinds for gold -- forecasts for a firm dollar and the drop in physical demand in emerging markets, which he said had helped bring previous rallies to an end -- he’s still bullish. “It looks as if the cocktail of factors driving gold higher just about outweigh those that would undermine it,” he said.

The gold price could rise to $2,000 according to analysts

Edward Sheldon, CFA | Tuesday, 15th October, 2019

The gold price has shot up over the last year and as a result, investors are excited about the precious metal again. According to new data from the World Gold Council, global gold-backed exchange-traded funds (ETFs) hit record assets under management in September.

Can the gold price keep rising? Some City analysts certainly believe it can. Here’s a look at some recent gold price forecasts.

Could gold hit $2,000?

Citigroup Senior Commodities Strategist Aakash Doshi is one analyst that is bullish on the yellow metal. He thinks gold could hit $2,000 an ounce “at some point in the next year or two” – a rise of around 34% from the current price.

Doshi recently said that positive drivers for the gold price include lower-for-longer nominal and real interest rates, escalating global recession risks exacerbated by US-China trade tensions, heightened geopolitical rifts, rich equity and credit market valuations, and strong central bank and investor buying activity.

Interestingly, Doshi is not the only analyst to forecast a price of $2,000 or more for gold, as the table below shows.

Bank of America/Merrill Lynch

$2,300                         

Unspecified

TD Securities                       

$2,000                   

Several years

Citigroup

$2,000

Within two years

Independent Strategy

$2,000     

Next year

Clearly, a number of analysts believe that there is considerable upside to the price of gold.

Worth investing?

Should you buy gold for your investment portfolio on the back of these bullish forecasts?

Well, the answer to that question depends on both your financial goals and what you expect to happen to the global economy and stock markets in the years ahead.

Personally, as I recently outlined here, I think that having a little bit of exposure to gold could be sensible as a form of portfolio insurance. Investing in gold can be an effective way to diversify your portfolio because its price movements tend to be uncorrelated to the movements of other assets such as equities and bonds. So, if global stock markets were to decline, gold could provide some protection.

Gold steady ahead of Brexit talks; weak U.S. data lends support

Karthika Suresh Namboothiri October 16, 2019 Reuters

Gold prices were nearly steady on Thursday as traders refrained from making any big bets in the absence of fresh developments on the Sino-U.S. trade war front and Brexit negotiations, while weak U.S. retail sales data provided support.

Spot gold rose 0.1% to $1,490.81 per ounce as of 0630 GMT. U.S. gold futures GCcv1 inched 0.1% higher to $1,494.90.

“Gold has broken multiple resistance levels in recent times and now we are seeing a correction taking place,” said Silver Bullion sales manager Vincent Tie.

“But weak data across the world has firmed concerns about a slowdown in the global economy and that is providing some support to the safe-haven metal.”

Market participants look for updates on the U.S.-China trade talks. Trade negotiators were working on nailing down a Phase 1 trade deal text for their presidents to sign next month, U.S. Treasury Secretary Steven Mnuchin said on Wednesday, but offered little details.

With no top-level meetings in sight anytime soon, investors pondered how much longer the ugly trade spat, that has roiled financial markets around the world, will continue.

Investors are also in a wait-and-watch mode ahead of Brexit talks later in the session, which will determine how Britain will part with the European Union.

Global stocks barely moved as soft U.S. data raised concerns about the health of the U.S. economy and risks of global recession, given consumption has been one of few remaining bright spots in the global economy.

U.S. retail sales dropped for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy, keeping the door open for the Federal Reserve to cut interest rates again later this month.

OCBC said the October rate-cut fever may resume as global risk sentiments stay muted after disappointing retail sales numbers, which could prove to be a tipping point for the U.S. economy.

Among other precious metals, palladium notched a record high of $1,783.21 an ounce, extending gains into a fourth session.

Palladium is crucial in the making of catalytic converters used in exhaust systems of vehicles, and concerns over its supply running out have helped lift prices by more than 41% this year alone, despite a weakening auto sector.

Meanwhile, silver was flat at $17.38 per ounce, while platinum inched 0.2% higher to $884.79 per ounce.

LAWRIE WILLIAMS: Gold, silver and pgm one year price forecasts

Sharps Pixley October 17, 2019 

 

On gold price forecasting should one put one’s trust in expert opinions, chart trends or just informed guesswork?  Certainly delegates to the annual London Bullion Market Association (LBMA)/ London Platinum and Palladium Market (LPPM) conference will comprise all of the above, so the annual exit poll forecast of where precious metals prices will be in a year’s time represents a consensus opinion which is certainly worth taking into account. 

The 2018 Boston end-conference poll taken a few days later in October thus looks like it may be uncannily accurate as far as gold is concerned, with an average price prediction of $1,532 an ounce.  This then bullish poll outcome was taken at a time when gold was struggling to maintain a level of around $1,200.  Predicting the yellow metal’s price a year in advance is an invidious task and certainly can be prone to substantial under- or over-‘guessing’ as individual ‘experts’ who contribute to the LBMA’s year-end forecasting competition have often found to their chagrin.  But the apparent success of last year’s ‘exit poll’ in coming up with an average figure which looks like being close to the likely gold price level of a couple of weeks’ time is drawing attention to this year’s forecast as being both a potentially accurate target price level and something on which to base one’s own precious metals investment strategy.

This year’s annual LBMA/LPPM meeting was held in Shenzhen, China and ended on October 13th and the unofficial average price predictions for the four major precious metals for a year ahead were as follows:  Gold $1,658, Silver $23, Platinum $1,182 and Palladium $1,924.  So although delegates were decidedly bullish on gold they were even more so on silver and platinum, both forecast to rise over 30%, with palladium and gold up around 10% and 11% respectively.

While we would concur on the potential gold price rise by mid-October next year, we would be rather more cautious on silver and the pgms - particularly the latter.  While gold remains a monetary/investment metal the others have a far stronger industrial take-up in their demand parameters - particularly the pgms.  The latter are heavily dependent on the automobile sector for their demand – platinum on the diesel market and palladium on the petrol (gasoline) internal combustion engine market, and these are in the midst of a seemingly unending downturn.  While –ever-increasing anti-pollution legislation may be suggesting rising pgm loadings in exhaust emission control catalysts (the big market) this is being offset by falling automobile and truck sales and the pgm supply/demand fundamentals may be being substantially affected by this.

Silver too has a strong industrial demand element in its own supply/demand equation and if the world is heading for a global recession, as many are predicting this too could see a substantial fall in demand, although it could be rescued by ever-growing solar panel development and sales.  Silver though has a much greater propensity to advance along with the gold price – and exceed gold’s advance in percentage terms when prices are rising.  However we do see the relationship between the two diverging from past performance in the years ahead so we view the LBMA/LPPM conference delegates’ average forecast as perhaps being too optimistic.  The Gold:Silver ratio is currently sitting at over 85, a historically high level, and while we see the ratio falling, perhaps not by quite as much as the conference delegates do (they are looking for a ratio of around 72 on the basis of their forecasts), we do still see the silver price as rising along with gold.

All the above has prompted us to make our own precious metals forecast as to where we see the prices in a year’s time.  Gold at around $1,650 - somewhat similar to the delegate average forecast, but then silver at around $21 – suggesting a gold:silver ratio at 78; platinum at a round $1,000 and palladium much where it is today at $1,750,  In fact we wouldn’t be at all surprised to see palladium a little lower in a year’s time.  Sticking my neck out I know, but readers will probably have forgotten my forecasts in a year’s time although, of course, if my figures are anywhere near correct I’m sure I’ll resurrect them and remind you all of the fact!

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