Category Archives: General

Gold logs lowest finish since the start of the year as risk-on sentiment prevails

Gold logs lowest finish since the start of the year as risk-on sentiment prevails

Gold prices on Monday marked their lowest finish since the first full trading day of the year, finding little haven-related interest as appetite for riskier assets lifts global equities, the U.S. dollar strengthened against the Japanese yen, and bond yields climbed.

“Upbeat trader and investor attitudes” worked against the precious metals markets to start the trading week, said Jim Wyckoff, senior analyst at Kitco.com, in a daily note.

“The U.S.-Iran conflicted has, at least for the time being, died down and the U.S. and China are this week set to sign a partial trade deal, which is likely to stimulate global economic growth in 2020,” he said. However, “the marketplace is keeping an eye on major protesting in Iran following the admission from the Iranian government that its military mistakenly shot down a passenger airliner last week.”

Against that backdrop, gold for February delivery GCG20, -0.72% on Comex fell $9.50, or 0.6%, to settle at $1,550.60 an ounce. That was the lowest finish for a most-active contract since Jan.2, FactSet data show. March silver SIH20, -1.12% lost 10.9 cents, or 0.6%, to $17.996 an ounce.

The U.S. dollar versus the Japanese yen rose 0.4% to trade at 109.918 USDJPY, +0.13% after hitting its highest level against the Japanese currency since late May. A stronger dollar is often seen as a negative for gold and other commodities priced in the unit, making them more expensive to users of other currencies. In addition, the Japanese yen is also seen as arguably the biggest beneficiary of haven flows during bouts of geopolitical uncertainty.

“If the price action on this pair is anything to go by then gold could head in the opposite direction as demand for safe-haven assets drop back with the U.S.-Iran tensions easing,” said Fawad Razaqzada, market analyst at Forex.com, in a note.

“Indeed, gold and the USD/JPY tend to have a strong negative correlation with one another. Gold bugs better hope then that either the negative correlation breaks down or the breakout in the USD/JPY turns out to be a fake one,” he said.

In other metals trading, March copper HGH20, -0.23% rose 1.7% to $2.861 a pound.

April platinum PLJ20, -0.83% fell 0.4% to $982.10 an ounce, while March palladium PAH20, +0.08% edged up by 0.3% at $2,079.10 an ounce. Prices for palladium shook off some earlier weakness to notch another record high.

“The path of least resistance remains up in the palladium market, with general optimism into the US/Chinese trade deal signing likely setting the stage for further new all-time highs,” said analysts at Zaner Metals in a daily note.

 

MYRA
P. SAEFONG
MARKETS/COMMODITIES REPORTER
Published: Jan 13, 2020 2:20 p.m. ET

Santa Claus rally in gold and silver crowns a very good year

Santa Claus rally in gold and silver crowns a very good year

It was a very good year for precious metals. Gold posted a nearly 19% gain and silver rose over 17%. As you can see in the chart below, the move higher began in early summer defying the annual summer doldrums, hit an impasse during autumn, then ended the year with a surprise Santa Claus rally that took it over the $1520 mark. Silver pushed briefly over the $18 mark in late December then settled at $17.78. Bloomberg Intelligence’s Mike McGlone offers a hopeful tone for our favorite precious metal as 2020 begins:

“It’s a new year and decade and gold is poised to follow the dollar and equities to new highs, in our view. When, should be the primary question, particularly when the stock market and greenback succumb to some normal mean reversion. Absent a new higher dollar and stock-price plateau, gold is set to join the all-time-highs club. Gold prices are on a sound footing for further advancement in the coming year and decade, in our view. Gold prices are on a sound footing for further advancement in the coming year and decade, in our view.”

Gold and Silver Prices (2019)

The importance of gold hitting record highs in most foreign currencies last year

In five of the top eight economies – the United Kingdom, Japan, Canada, Australia, and India – gold posted all-time highs in the local currency during the course of the year. In short, as currencies raced for the bottom, gold raced to the top. “The true hallmark of a bull market in gold,” says veteran technical analyst John Murphy, “is its ability to rise relative to other major currencies. And it’s doing just that.”

“Historically,” adds Atlas Pulse’s Charlie Morris in a recent in-depth report on gold’s prospects for 2020, “it has proved to be important that gold rises in all currencies, and not just in US dollars. This simple test ensures we don’t mistake dollar bear markets for gold bull markets. Since 2000, the world’s best currencies have been the Swiss Franc and the Thai Baht, and gold recently broke higher in both. That implies that gold is rising everywhere.”

Mark Mobius (Mobius Capital Partners) explains in a NewsMax interview why he thinks investors should allocate at least 10% of their portfolios to gold:

“The reason is that gold maintains its status as a currency – a currency that has stood the test of time. There is a growing realization that the supply of fiat money is growing at a rapid pace not only because of central bank activities to drive down interest rates by printing more money but also because of the rapid and inexorable rise of cryptocurrencies. . .They are beginning to realize that fiat currencies like the U.S. dollar and euro really do not have anything behind them except the faith of the public.”

And that, to sum it up, explains why gold has performed so admirably over the past year against the world’s top currencies.

Gold in various world currencies (2019)

There’s one major reason why you shouldn’t sell gold right now strategist says

There’s one major reason why you shouldn’t sell gold right now, strategist says

Gold prices have recently hovered at seven-year highs after the U.S. killing of Iranian military commander Qasem Soleimani, which spiked tensions between Washington and Tehran in the Middle East.

Analysts have been broadly bullish on gold of late, with Goldman Sachs setting a base case for it to trade at $1,600 per troy ounce (toz) in the coming months.

GP: Gold and Silver Casting at the Perth Mint 190918

Gold bars sit in a vault at the Perth Mint Refinery in Perth, Australia, on August 9, 2018.

There are lots of reasons to bet against the gold price rally at the moment but one key reason not to, according to Longview Economics CEO Chris Watling.

Gold prices have recently hovered at seven-year highs after the U.S. killing of Iranian military commander Qasem Soleimani, which spiked tensions between Washington and Tehran in the Middle East and forced investors into traditional safe-haven assets.

Speaking to CNBC’s “Squawk Box Europe” Friday, Watling cited one of the reasons to “short” the precious metal was the beginnings of a cyclical recovery in the global economy.

“What really determines the gold price is typically real interest rates, Fed funds interest rate expectations and things like that, and I think we can price out a cut from the Fed funds curve, I think we’re going to get TIPS (Treasury Inflation Protected Securities) yields moving up this year, and actually it’s quite a consensus ‘long’ now, so all of that is a good reason to sell it,” Watling said. Shorting an asset refers to a trading strategy where investors bet that its price will fall, rather than rise.

Gold is often used as a hedge against inflation, in other words, to protect the decreased purchasing power of a currency resulting from its loss of value due to rising prices.

The U.S. Federal Reserve has halted its cutting cycle, keeping its benchmark overnight lending rate in a range between 1.5% and 1.75% in December and projecting no moves in 2020. The central bank had cut rates three times in 2019.

Three reasons to like gold, says Goldman Sachs

However, he suggested that the one key reason not to bet against gold prices continuing to climb would be the Fed’s repo program, an ongoing operation to soothe the overnight lending market.

“It is putting a lot of liquidity, a lot of dollar money, into the system, and that is supporting the price,” he added.

Analysts have been broadly bullish on gold of late, with Goldman Sachs expecting a base case for it to trade at $1,600 per troy ounce (toz). Spot gold was trading down around 0.2% at $1,549/toz on Friday after tensions between the U.S. and Iran slightly abated.

However, Goldman’s Global Head of Commodities Research Jeff Currie told CNBC’s “Street Signs” on Friday that with the right combination of circumstances, gold could push even higher through 2020.

“Gold is a hedge against debasement and what we saw in 2011 was debasement, printing too many dollars and the real rate goes down, down, down, which then pushes up the price of gold,” Currie explained, adding that another crucial factor in play on that occasion was a substantial weakening of the dollar, which further propelled gold prices.

“If you do see that, the potential to push gold back up into that $1,800-$1,900 range becomes pretty realistic,” he added.

 

Elliot Smith

Don’t panic about Iran but don’t sell your gold either

Don’t panic about Iran – but don’t sell your gold either

“Gold has had one of its more excitable runs since the start of the year. It surged so much in the wake of the Iran airstrikes that it even drew the attention of the broadsheet financial press. So naturally, the price was bound to tank shortly afterwards. Which is precisely what happened this morning. If you’re a gold investor, you might be fretting that gold’s high point for 2020 has already come and gone. I wouldn’t worry.”

USAGOLD note: We mentioned this insightful opinion piece from MoneyWeek’s John Stepek in yesterday’s DMR. We revisit it here for those who might have missed it. Stepek offers some helpful perspective on the gold market’s volatility over the past several days then takes an in-depth look at why “there should always be a bit of it in your portfolio.

 

MoneyWeek/John Stepek/1-9-2020

Posted on January 10, 2020 by Opinion

Stocks are now more overvalued than ever per this measure

Stocks are now more overvalued than ever per this measure

“Therefore, looking at the ratio of market valuations to overall profits suggests ‘P/E ratios are some 80% above the long-term norm,’ [Ned]Davis wrote.”

USAGOLD note: Ned Davis is a highly-respected Wall Street analyst. The 80% figure takes into account overvaluation resulting from corporate stock buybacks. The investing public will largely ignore the astute Mr. Davis like all others who issue warnings about the stock market overvaluation. (Please see the post immediately below.) That said, for those who tend to be more open-minded, the article linked above is worth the time spent.

“I know this because anytime I go on Twitter, the financial pundits are tweeting about stocks. They usually don’t tweet about bonds or commodities or FX. I follow one or two oddballs that tweet about volatility. But it’s usually wall-to-wall stocks. Mostly Farmers’ Almanac stuff about how ‘9 of the last 11 Decembers have been positive,’ and ‘60% of the time it works every time.’”

USAGOLD note: In the internet age, stocks have become an obsession bordering on mania. Dillian makes reference to “popular delusions.” The pros are getting out – hedging their bets with the full understanding that ‘trees do not grow to the sky’, as Dow Theory Letter’s Richard Russell used to put it. The investing public is still gung-ho on stocks. Dillian suggests diversification.

“Have you ever seen in some wood, on a sunny quiet day, a cloud of flying midges — thousands of them — hovering, apparently motionless, in a sunbeam? …Yes? …Well, did you ever see the whole flight — each mite apparently preserving its distance from all others — suddenly move, say three feet, to one side or the other? Well, what made them do that? A breeze? I said a quiet day. But try to recall — did you ever see them move directly back again in the same unison? Well, what made them do that? Great human mass movements are slower of inception but much more effective.” – Bernard Baruch, Wall Street financier (1870-1965)

 

MarketWatch/Chris Matthews/1-8-2020

Posted on January 9, 2020 |

 

Gold’s 1500 level is ‘looking like the new 2020 floor’ – Scotiabank

Gold's $1,500 level is 'looking like the new 2020 floor' – Scotiabank

(Kitco News) Gold's strong start to the year has put prices well above the precious metal's previous hard floor of $1,450 an ounce, said Scotiabank.

“$1450 was the new hard floor but gold is now firmly in a spot where the risk/reward in being directionally short is not favorable — $1500 is increasingly looking like the new 2020 floor…,” wrote Scotiabank commodity strategist Nicky Shiels last week.

Overnight gold prices neared seven-year highs as February Comex gold futures hit $1,613.30 following an Iranian missile strike near U.S. troops in Iraq.

In the latest move, gold retreated around 1% on the day to $1,558.30 as U.S. President Donald Trump said Iran “appears to be standing down” in a speech on Wednesday.

The consequences of the escalating U.S.-Iran tensions could be in the form of “a tit-for-tat retaliation cycle that ultimately argues for larger supply-side risks to be priced into Oil and for a larger geopolitical premium into gold,” the strategist pointed out.

Gold is “smart,” noted Shiels when talking about the metal’s year-end strength and trading patterns.

“Gold’s repricing was aligned with a shift in the Fed in 2H'2019, but elevated pricing also incorporates the potential threat of 'fear drivers' such as trade, political/ geopolitical & growths risks re-emerging, which markets have learned can play out at the drop of a tweet at any point,” she highlighted.

The yellow metal’s trading patterns and drivers help when looking at gold long-term.

“The ability for gold to consistently adapt from internalizing old drivers (escalating trade rhetoric, negative risk appetite and moves in rates in Q3'19) to new drivers (falling US$, upping of inflation expectations, curve steepness, EMFX & commod FX strength in Dec 19), back again to internalizing its haven qualities (today) is a constructive development for the longer-term outlook,” the commodity strategist said.

Gold is also starting to see strong seasonal investor inflows that will likely continue into 2020, Shiels added.

“Fresh geopolitical risks will to be appropriately priced into relatively fairly priced havens (there’s a rethink around negatively yielding European debt undermining their safe haven role) and global markets are only fully 'back to school' next week – mid January,” she wrote.

 

By Anna Golubova

For Kitco News

Wednesday January 08, 2020 14:28

Gold silver gain as traders step in to buy the early dip

Gold, silver gain as traders step in to buy the early dip

Editor's Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It’s a showdown of global proportions, so don’t miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.

(Kitco News) – Gold and silver prices are moderately higher in midday U.S. futures trading Tuesday. Downside price corrections overnight were viewed as a buying opportunity and prices pushed higher in the day session, after gold hit a nearly seven-year high Monday and silver notched a more-than-three-month high. February gold futures were last up $4.60 an ounce at 1,573.30. March Comex silver prices were last up $0.201 at $18.375 an ounce.

It appears risk aversion in the global marketplace has at least temporarily subsided following last week’s geopolitical shockwave that occurred when a U.S. drone strike killed a leading Iranian general in Baghdad, Iraq. It could be that many traders and investors figure Iran will not execute a major retaliation against the U.S. and its vaunted military, knowing such a move would invite a likely massive and devastating counter-attack from the U.S.—as was threatened by President Trump in a weekend tweet. Other veteran market watchers reckon Iran will retaliate against the U.S. but not right away. However, virtually all market participants agree the U.S. drone strike further stokes and already volatile Middle East.

The key “outside markets” today see crude oil prices lower and trading around $62.50 a barrel. Meantime, the U.S. dollar index is higher.

Technically, Monday’s high of $1,590.90 in February gold futures is still strong overhead technical resistance for the bulls to overcome. The bulls do have the solid overall near-term technical advantage amid a seven-week-old price uptrend in place on the daily bar chart. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,590.90. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,530.00. First resistance is seen at $1,580.00 and then at $1,585.00. First support is seen at $1,556.60—the bottom of Monday’s upside price gap on the daily bar chart–and then at 1,550.00. Wyckoff's Market Rating: 8.0

March silver futures prices closed at a 3.5-month high close today. The silver bulls have the firm overall near-term technical advantage amid a four-week-old price uptrend in place on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $19.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $17.50. First resistance is seen at this week’s high of $18.55 and then $18.75. Next support is seen at $18.00 and then at last week’s low of $17.83. Wyckoff's Market Rating: 7.0.

March N.Y. copper closed up 30 points at 279.30 cents today. Prices closed near mid-range today. The copper bulls have the overall near-term technical advantage. However, a four-month-old uptrend on the daily bar chart is now in jeopardy. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 290.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 270.00 cents. First resistance is seen at today’s high of 280.40 cents and 283.00 cents. First support is seen at last week’s low of 275.95 cents and then at 273.00 cents. Wyckoff's Market Rating: 6.5.

  By Jim Wyckoff For Kitco News Tuesday January 07, 2020 13:01

Why precious metals make sense for your IRA in the age of low to negative real rates of return

Why precious metals make sense for your IRA in the age of low to negative real rates of return

The warnings from financiers and analysts on the impact of low to below zero interest rates on investment planning come almost daily. Reuters’ Toby Sterling recently told the story of a Dutch pension fund that was actually reducing monthly payouts to its subscribers by 8% directly the result of Europe’s negative interest rate environment. “The planned reductions,” writes Sterling, “due to take effect from January 2020, have shaken a country renowned for having one of the world’s strongest pension systems, and are an early warning to others about the impact of record-low interest rates.”

Negative interest rates are a reality in both the European Union and Japan. Alan Greenspan recently said that it is “only a matter of time” before they spread to the United States. One of the arguments against gold over the years has been that it costs money to own it. Now it costs money to own euros and yen, and before too long it might cost money to own the dollar as well. “One of the reasons,” Greenspan added in that same CNBC interview, “the gold price is rising as fast as it is – you know, at $1500 a troy ounce . . . What that is telling us is that people are looking for resources they know are going to have a value 20 years from now, or 30 years from now, as they age and they want to make sure they have the resources to keep themselves in place.”

The advent of negative rates is perhaps one of the more profound differences between this gold rally and rallies in the past. It might also prove to be the most enduring. If you have an interest in hedging your IRA with precious metals, we can help.

 

Posted on January 6, 2020 by USAGOLD

Gold Surges Due To Troubled Fed Repo amp US Treasury Market

Gold Surges Due To Troubled Fed Repo & U.S. Treasury Market

Gold continues to move higher due to trouble in the Fed Repo and U.S. Treasury Market. In the first hour of business today, the Fed has already injected $57 billion in the Repo Market. While the Fed’s Repo Market injections didn’t spike during the last few days of 2019, as many analysts forecasted, there’s still BIG TROUBLE ahead.

Many reasons have been attributed to the break-down in the U.S. Repo Market that started on September 17th when the daily repo rate spiked to 10%. Several readers have sent me very interesting information and youtube videos on the subject matter. I thought it was a good time to sift through all the information and present my analysis on what the hell I believe is going on.

First and foremost, while there are many reasons given for why the Fed Repo rate spiked, forcing the Fed to provide hundreds of billions of dollars of short-term liquidity in the market, these are “ALL SUPERFICIAL” reasons. The major factors causing wide-spread havoc throughout the financial system are the Falling EROI- Energy Returned On Investment of oil and the Thermodynamics of oil depletion. While these are two different energy analyses, they come to the same conclusion. The financial analyst community and market are still ignoring these key energy factors.

Second, the main “SUPERFICIAL” reason that caused the Fed Repo rate to spike is that there weren’t enough buyers for the increasing amount of U.S. Treasury issuance.

700

After the 2008-2009 financial crisis, U.S. Government deficits ballooned, forcing the “Net Issuance” of more U.S. Treasuries. In the chart above, the net issuance of U.S. Treasuries spiked to $1,585 billion ($1.58 trillion) in 2010. However, after the economy started to recover, the net issuance of U.S. Treasuries continued to decline to only $534 billion in 2017. But, the very next year, in 2018, something changed as the U.S. Treasury net issuance surged to $1,104 billion. This was bad news… but why?

We have to remember that the Fed started reducing its balance sheet by selling U.S. Treasuries and Mortgage-Backed Securities into the market in early 2018:

700

So, get this… the Fed was a net seller of U.S. Treasuries and Mortgage-Backed Securities in 2018 right at the very same time, the U.S. Government’s net issuance of U.S. Treasuries doubled from $534 billion in 2017 to $1,104 billion in 2018. This had a profound impact on the U.S. Treasury rates, especially the 10 Year/3 Month Spread.

Now, to make this easy to understand, the 10-Year/3 Month Treasury rate spread shows how much more demand there is for either the shorter-term Treasuries or the longer-dated ones. If the 10-Year/3 Month spread falls, then there is more demand for the 10 year Treasury, which suggests investors are worried about an upcoming recession. The 10-Year/3 Month U.S. Treasury spread has been steadily falling since 2010 and is now only 0.02 compared to 3.08 in 2010:

According to SIMFA, the Securities Industry & Financial Markets Association, the average rate for the 10 Year U.S. Treasury (Jan-Nov) was 2.17 versus 2.15 for the 3 Month Treasury Bill. Thus, there is a positive 0.02 Spread. However, there were some real problems starting in June when the 10-Year/3 Month Treasury spread went NEGATIVE:

There is no coincidence that the Gold Price began to take off in June 2019 when the 10-Year/3 Month Treasury spread went negative… for the first time since the 2007 financial crisis began. As the 10-Year/3 Month, Treasury spread went further negative until August, the gold price continued higher to reach a peak of $1,560 at the end of the month. Then what happened in September and October?? You got it, the Fed came in and started the Repo Operations in mid-September and then announced the $60 billion a month in U.S. Treasury purchases in mid-October:

The GREEN arrow shows where the 10-Year/3 Month Treasury spread started to go negative, and over the next three months, as the spread reached a low of -0.36 in August, the gold price increased $300. The RED arrows show that when the Fed came in to save the day in September with its Repo Market operations, providing short-term liquidity, and then again in October to buy $60 billion a month, the 10-Year/3 Month spread moved higher.

If we look at the U.S. Treasury Net Issuance chart again, we can see that the U.S. Government is in trouble as it has to finance a lot more of its annual deficits:

With the global economy stalling and some regions heading into a recession, there are fewer surpluses available to be able to buy the increasing amount of U.S. Treasuries, not including the amount that is continuously rolled over.

Even though there may be a BIG PROBLEMS with individual banks that caused the Fed Repo rate to spike on September 17th, the main issue is that the U.S. Government is issuing more Treasuries than the market can absorb. Thus, the Fed had to start buying U.S. Treasuries, which helped push the 10-Year/3 Month spread back into positive territory. However, the problem isn’t over as the market mistaken assumes… IT’S JUST BEGINNING.

I believe the September 17th Fedo Repo rate spike to 10% was the CRISIS and will only get worse as time goes by.

 

by: Steve St. Angelo

Money Metals News Service

January 3rd, 2020

Gold and Silver Climb As Iran Attack Sends Haven Assets Higher

Gold and Silver Climb As Iran Attack Sends Haven Assets Higher

Gold rose to a four-month high after a U.S. airstrike killed one of Iran's most powerful generals, ratcheting up tensions in the Middle East.

Spot bullion climbed 0.9% to $1,542.47 an ounce. Silver rallied 1.3%, while platinum and palladium also advanced. The yen strengthened 0.6% and oil jumped close to $70 a barrel.

The strike in Baghdad ordered by President Donald Trump killed Qassem Soleimani, the Iranian general who led the Revolutionary Guards' Quds force. Iran's supreme leader, Ayatollah Ali Khamenei, vowed "severe retaliation."

"The likelihood of further reactions cannot be ruled out, which may keep gold supported in the near term," Jingyi Pan, market strategist at IG Asia Pte in Singapore, said in an email.

Bullion is building on a 2019 rally as the dollar weakens and geopolitical concerns return. Prices rose 18% last year, the biggest annual advance since 2010.

Last year's advance marked a positive shift in investor attitude toward gold, according to RBC Capital Markets, which predicted further gains this year and next. Goldman Sachs, Citigroup and UBS Group have said they're looking for $1,600 an ounce.

January is historically gold's best month, according to Bloomberg Intelligence. If prices match the average January advance of 2.7% over the past 20 years, they'll surpass the six-year high reached in September. The metal will approach $1,600 by February if it matches the 5.2% average increase of the past five years.

 

BLOOMBERG NEWS04:22 AM ET 01/03/2020