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Silver price beaten down but investors cant find any so what’s going on? Peter Hug Responds

Silver price beaten down but investors can‘t find any, so what’s going on? Peter Hug Responds

Silver’s future is bleak as a recession could wipe out any industrial demand left for the metal, this according to Peter Hug, global trading director of Kitco Metals.

Monetary policy was not enough to calm investors, Hug noted, as markets reacted negatively to the last Federal Reserve rate cut made last Sunday.

“That episode really scared the market. It indicated that the Fed pushing on a string here is not going to solve the issue. It’s going to require some significant fiscal policy,” he said.

Hug said that a recession may now be underway.

“Ignoring the economics of a significant recession – it may be short lived, if we’re not already in it – if we ignore the economics of it, silver [is] an industrial metal and there would be virtually no demand for it,” he said.

Hug said that the recent price decline in metals is due to traders and investors liquidating their metals to meet margin calls, putting even more pressure on the physical market.

“Because there is no physical metal in the market right now, both the U.S. Mint and the Canadian Mint are on allocation with some products anywhere from four to six weeks out, at a minimu, we’re looking at a situation where there isn’t enough physical offtake to offset the selling of the ETFs and the futures, because there’s no physical product left to buy,” he said.

Spot silver traded 20 cents higher on the day Tuesday.

Silver prices plummet as mints can’t keep up with demand

Silver prices plummet as mints can’t keep up with demand

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Precious metals have plunged in the markets, but there is still demand for physical coins in the midst of the coronavirus outbreak, this according to Phil Streible, chief market strategist of Blue Line Futures.

“I can tell you one thing, I called around the last couple of days trying to buy physical metals, specifically physical silver, and silver was a $1.50 to $2.00 over spot, so there is an underlying demand that is out there right now, just more on the physical side,” Streible told Kitco News.

His comments come as spot silver retreated $1.70 an ounce on Monday.

Streible noted that while bonds have done well, there may not be much upside left given the run-up we have already seen.

“It seems like the only place that anyone found any safe haven in was the bond market, but with yields dipping back down below 0.64%, I think that there’s not much room there on the upside,” he said.

On metals, Streible said that it is better now to be positioned in the physical space, rather than the miners or leveraged products.

Gold should be bouncing back from this selloff later in the year, he said.

“The key level you have to look at in gold is $1,508. That’s the 200-day moving average, if we don’t close below there, I think we’d still be in a pretty healthy market,” he said.

 

By Kitco News
For Kitco News

Gold futures log largest weekly loss in more than 8 years

Gold futures log largest weekly loss in more than 8 years

Gold futures ended sharply lower for a fourth straight session on Friday, with a loss of more than 9% for the week—the largest since September 2011.

Volatility-shocked investors looked for news on fiscal stimulus packages from governments around the world to help ease the economic pain of the COVID-19 epidemic that has ground some of the world’s business activity to a halt and rocked financial markets.

“It seems that investors have been selling gold in order to cover losses elsewhere,” said Caroline Bain, chief commodities economist at Capital Economics, in a Friday research note. “Ample liquidity in the gold market means that the sale of gold holdings is a relatively quick and seamless way to raise cash in times of need.”

Gold for April delivery GCJ20, +0.80% on Comex fell $73.60, or 4.6%, to settle at $1,516.70 an ounce. Prices for the metal, based on the most-active contract, ended at their lowest level year to date, according to FactSet data. Gold futures saw a weekly loss of 9.3%, the biggest percentage decline since the period ended Sept. 23, 2011.

May silver SIK20, +1.27% dropped $1.505, or 9.4%, to end at $14.50 an ounce, after the metal tumbled 4.6% in the previous session. A settlement around this level would be the lowest most-active contract finish since May of last year. For the week, silver lost 16%.

The United States Mint said Thursday that it has temporarily sold out of American Silver Eagle bullion coins. “Our rate of sale in just the first part of March exceeds 300% of what was sold last month,” the Mint said. Sales of the one-ounce American Silver Eagle coins were at 2.32 million so far this month, as of Thursday, compared with sales of 650,000 in the month of February, according to data from the Mint.

“It’s a double whammy of low production…and a sudden spike in demand,” said Dana Samuelson, president of precious-metals dealer American Gold Exchange Inc. “I’m not convinced that buyers are rushing in because the price dropped. This is a fear driven surge in demand.”

House Speaker Nancy Pelosi said she and President Donald Trump were near an agreement on a an aid package to help address the health emergency that is created by the infectious disease that was first identified in Wuhan, China in December and has infected about 128,000 people world-wide. Pelosi said the House will pass a coronavirus bill aimed at helping families.

U.S. benchmark stock indexes climbed Friday, a day after the Dow DJIA, +9.36% and the S&P 500 SPX, +9.28% suffered their biggest one-day plunge since the October 1987 crash. The U.S. dollar also strengthened, with the ICE U.S. Dollar Index DXY, +1.25% up 1.3% as gold futures settled, looking at a gain for the week.

Gold has declined this week even though markets remain volatile as the metal’s “natural opposition to the U.S. dollar has been restored and for the short term,” said Colin Cieszynski, chief market strategist at SIA Wealth Management Inc.

“The plunge in Treasury yields a few weeks ago, depressed the US dollar and boosted gold, but now that the panic rush into bonds has eased a bit, the US dollar has rebounded against gold and other currencies like the Yen USDJPY, -0.03% and the Euro EURUSD, +0.36%, and gold has dropped back,” he told MarketWatch.

Taking a look at the bigger picture for gold, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said “some investors who were reluctant to part with their equities at depressed prices were able to sell gold in order to meet the margin calls,” prompting the recent declines in the price.

“This is exactly the same as what happened a week and a half ago before the emergency rate cut from the Federal Reserve, and when equities dropped dramatically in 2008, 2001, 1987, etc.” he told MarketWatch. “In all those previous cases, investors were able to take advantage of gold’s liquidity to meet margin calls, and the gold price quickly recovered within days [or] weeks. That is what I am expecting to recur this time around.”

 

Published: March 13, 2020 at 2:42 p.m. ET
By Myra P. Saefong and Mark DeCambre

‘Confused’ Wall Street split on near-term gold-price direction

'Confused' Wall Street split on near-term gold-price direction

Some might argue that gold prices have been unpredictable lately, thus maybe it seems fitting that Wall Street analysts are split on price direction for next week, based on the weekly Kitco Gold price survey.

Main Street, however, remains bullish.

Since coronavirus became a household word in 2020 as the illness spread around the world, equities have been mostly on the defensive on worries about the impact on the global economy. At times, gold has benefited from stock-market weakness, getting a safe-haven bid. But at other times when stocks were getting hammered, analysts said some traders were having to sell profitable positions in gold to help meet margin calls and offset losses in other markets.

"Gold traders are presently confused by the volatile, up-and-down price action in gold the past week," said Jim Wyckoff, senior technical analyst with Kitco, who looks for choppy, sideways trading in a "non-trending" market.

Fifteen market professionals took part in the Wall Street survey. There were six votes, or 40%, for both higher and lower prices next week. Three participants, or 20%, were neutral or called for sideways prices.

Meanwhile, 1,434 votes were cast in an online Main Street poll. A total of 873 voters, or 61%, looked for gold to rise in the next week. Another 363, or 25%, said lower, while 198, or 14%, were neutral.
700

In last week's survey for the trading week now winding down, Wall Street and Main Street were both heavily bullish. Needless to say, their collective prognostication missed the mark, with Comex April gold down by 5.9% for the week so far to $1,573 an ounce just before 11 a.m. EST. Still, both Main Street and Wall Street have been right more often than not so far this year. Assuming gold remains lower for the week, both will finish Friday with 6-3 records so far in 2020 for a winning percentage of 67%, based on settlements in the April futures.

Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for gold to bounce.

"Gold is being hit again with liquidation as the markets melt down," he said of the weaker price action this week. "In these market panics, it is a source of liquidity. But once the panic liquidation subsides, even if the broad markets do not recover, gold will resume its role as a hedge and move up."

Richard Baker, editor of the Eureka Miner's Report, looks for gold to return to the $1,620 area next week as the recent selling abates.

"The best news for gold this week was its performance relative to the embattled S&P 500," Baker said. "Gold has recovered all the value lost to this equity benchmark since the 2018 presidential election…and more. Even while dropping below $1,600, the gold-to-S&P 500 ratio (AUSP) spiked to levels not seen since late 2016. From October 2018, the AUSP has been on an uptrend of higher lows; gold has doggedly gained value on equities. This is a bullish sign going forward, leaving the path clear for the $1,800 level in 2019."

Further, Baker added, negative real rates continue to mean a "very bullish environment for a non-interest-earning asset like gold."

Peter Hug, global director of metals trading with Kitco, said he looks for gold to end higher after next week's meeting the Federal Open Market Committee. Policymakers are expected to deliver another rate cut on top of the 50-basis-point emergency cut early this month.

Meanwhile, Daniel Pavilonis, senior commodities broker with RJO Futures, looks for further near-term weakness in gold before the metal bounces.

"With the dollar popping [higher] and stocks popping, we may come off a little bit lower in gold," he said.

Equities may bounce next week as the Federal Reserve acts to try to control the economic impact of the coronavirus, with gold slipping, Pavilonis said. But then, he continued, equities may turn lower again, with gold moving higher.

"I think we may stay down nest week," said Phil Flynn, citing the potential for more liquidation, "as well as the rising possibility of gold sales from global central banks to raise liquidity to attack the coronavirus. Russia, a big holder of gold, may use that as a backstop to ride out its oil price war with Saudi Arabia."

Chimed in Mark Leibovit, publisher of VR Metals/Resource Letter: "I warned of a cyclical peak, which is typically common this time of year. Gold is overvalued over $1,445. Can it go there? Depends if the financial crisis underway forces more liquidation in the gold market."

Andrew Hecht, a precious metals contributor to Seeking Alpha, said he expects "wild conditions" with gold "up and down."

"Risk-off in 2008 gold dropped from over $1,030 to $681, and then [gold] rose to a record high in 2011," he pointed out. "Central-bank policy is ultimately bullish."

 

By Allen Sykora
For Kitco News

 

Bloodbath golden opportunity

Bloodbath = golden opportunity

I have a simple but critical point to make today. The best time to buy gold stocks in my entire career so far was after the crash of 2008.

This historic opportunity is repeating itself.

Consider today’s mid-day decline in gold prices.

We've seen this before…

Gold gapped down on October 13, 2008, from $900.50 to $831.50.

In that case, this happened just a few weeks before the bottom. For reasons I’ve written about before, I failed to invest at that time and missed out on some life-changing opportunities. I'm not going to miss that chance this time.

When will that be?

I won’t pretend to know how closely history will repeat itself, but I’m skeptical that monetary and fiscal policy can prevent a global economic recession that could take markets much lower.

Why?

Because—whether it should or it shouldn’t—the proximal cause it still getting worse.

The COVID-19 outbreak is changing consumer behavior. It’s causing businesses to slam the brakes. It’s prompting governments to take extreme actions. And both the number of cases and the fatalities are going vertical.

Now, I’m not a doctor, and I’m not looking to make an argument about the medical realities of the situation.

In terms of public perception, it may matter more that beloved actor Tom Hanks has COVID-19 than that almost 5,000 people have died from it. The NBA cancelling its entire season, Trump banning travel from Europe for 30 days, universities sending students home… the pile-on here just keeps growing.

As a speculator, I see these trends accelerating, and I can’t ignore them. I can only conclude that the consequences will get worse until the lines above have peaked and the public believes things are improving.

So how will we know when the bottom is in?

We won’t for certain, except in hindsight. But as I’ve already written this week, we don’t need to be able to buy at the exact bottom in order to be able to make a lot of money. Near is good enough.

What a different a bit of experience makes…

I remember how I felt in 2008. It was like an elevator car dropping out of under me—repeatedly. This time, I saw it coming, took some profits, and prepared myself mentally to hunker down and get ready to buy when I’m sure the bottom is in. I don’t feel bad or disoriented at all. I feel eager.

I'm so looking forward to bottom-fishing that my greatest struggle now is to hold myself back when I see already great bargains. I know exactly what I want to buy.

This is why I like to say that times like this are like having a stock-market time machine. We can’t travel to the past, but we can buy at prices we missed in the past, before the future revealed which stocks would be winners.

I’m excited.

I’m as happy to have a chance to buy these stocks on the cheap as I would be to be able to buy a brand-new Ferrari for the price of a used Yugo.

I hope you are as well.

And I’d love to help you make the most of the opportunities before us as well.

If you’d like to know where I’m planning to deploy my own hard-earned cash, please check out my flagship newsletter, The Independent Speculator. You can try it for a month at relatively little expense and cancel if you decide it’s not for you.

If you already know what you want to buy and have questions about what to hold or sell, please try out my Consumer Reports-style newsletter, My Take. Again, you can try it for a month at relatively little expense and cancel if you decide it’s not for you. Note: due to heavy demand, we are doubling the price of My Take on April 5, 2020. Existing subscribers will be grandfathered.

And if you’d rather do all this on your own but just want my analysis of general market trends like the above, please make sure you’re signed up for our free weekly email, the Speculator’s Digest. I promise we won’t spam you with daily sales pitches. I will, however, do my best to deliver valuable, original analysis not published anywhere else, every week.

Whatever happens next, it will be chaotic—which means it will be full of opportunity.

Caveat emptor,
 

By Lobo Tiggre

NBA suspends season after Jazz player tests positive for coronavirus

NBA suspends season after Jazz player tests positive for coronavirus

The National Basketball Association (NBA) said on Wednesday it was suspending the season until further notice after a Utah Jazz player tested positive for the coronavirus.

The test result was reported shortly before the Jazz were due to play the Oklahoma City Thunder at Chesapeake Energy Arena. The game was then scrapped.

The league said the affected player, reportedly Jazz center Rudy Gobert, was not in the arena.

“The NBA is suspending game play following the conclusion of tonight’s schedule of games until further notice,” the league said.

“The NBA will use this hiatus to determine next steps for moving forward in regard to the coronavirus pandemic.”

More than 119,100 people have been infected globally by the flu-like virus and nearly 4,300 have died, according to a Reuters tally of government announcements. The pandemic rocked the North American sports calendar on Wednesday, leading to the cancellation of the figure skating world championships and the announcement that college basketball’s annual ‘March Madness’ tournament would take place without fans in attendance.

Miami Heat head coach Erik Spoelstra said his team were “stunned.”

“This is a very serious time right now. I think the league moved appropriately and prudently,” he said.

Dallas Mavericks owner Mark Cuban said the situation was “crazy”.

“This can’t be true,” he told ESPN as his team played the Denver Nuggets.

“This is not in the realm of possibilities. This seems more like out of a movie than reality.”

MampA is inevitable: Orefinder’s Steve Stewart

M&A is inevitable: Orefinder's Steve Stewart

While the uptick in gold has benefited most of the producers, juniors still haven't seen their share of the gains, but Stephen Stewart, CEO and director of Orefinders, believes deal-making is inevitable.

"The producers started seeing the cash flow to their bottom lines in Q3, and they've been performing well ever since. I think there will be incredible pressure to deploy that capital carefully," said Stewart. "The current narrative coming from the funds is to do dividends or re-invest the capital in their own projects."

Stewart lauds the miners for listening to their investors, but he said that there is a systematic issue that people aren't realizing: miners have been depleting their resources for five to six years.

"My thesis is that M&A is inevitable, whether it is today or tomorrow. I don't know when. It is just inevitable."

 

By Michael McCrae
For Kitco News

Beginning All-Out Price War

Beginning All-Out Price War

Saudi Arabia plans to boost oil output next month to well above 10 million barrels a day, as the kingdom responds aggressively to the collapse of its OPEC+ alliance with Russia.


 

The world’s largest oil exporter engaged in an all-out price war on Saturday by slashing pricing for its crude by the most in more than 30 years. State energy giant Saudi Aramco is offering unprecedented discounts in Asia, Europe and the U.S. to entice refiners to use Saudi crude.

At the same time, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record 12 million barrels a day, according to people familiar with the conversations, who asked not to be named to protect commercial relations. With demand ravaged by the coronavirus outbreak, opening the taps would throw the oil market into chaos.

“Saudi Arabia is now really going into a full price war,” said Iman Nasseri, managing director for the Middle East at oil consultant FGE. The Saudi Energy ministry didn’t respond to a request for comment.

Aramco’s unprecedented pricing move came just hours after the talks between the Organization of Petroleum Exporting Countries and its allies ended in dramatic failure. The breakup of the alliance effectively ends the cooperation between Saudi Arabia and Russia that has underpinned oil prices since 2016. Production limits agreed to by OPEC and its erstwhile partners expire at the end of the month, opening the way for producers to ramp up output.

The company’s shares plunged 9% in Riyadh on Sunday, the first time the stock slumped below its initial offering price. Aramco traded at 29.95 riyals as of 1:57 p.m., giving it a market value of 6 trillion riyals ($1.6 trillion). The Saudi government sold 1.5% of the energy giant’s shares at 32 riyals each in December.

Brent crude, the global oil benchmark, closed down 9.4% on Friday, its biggest daily drop since the global financial crisis in 2008, settling at $45.27 a barrel.

Saudi production is initially likely to rise to between 10 million and 11 million barrels a day in April, from about 9.7 millions a day this month, according to people familiar with Saudi thinking. The final figure would depend on the response of refiners to the price cuts, the same people said.

Maximum Pain

The shock-and-awe Saudi strategy could be an attempt to impose maximum pain in the quickest possible way to Russia and other producers, in an effort to bring them back to the negotiating table, and then quickly reverse the production surge and start cutting output if a deal is achieved. In a sign that both sides remain in talks, the OPEC+ Joint Technical Committee, a body of senior oil officials who advise ministers, plans to meet on March 18 to review the global oil market, according to delegates. Saudi and Russian officials are part of the JTC.

“It’s certainly a high-risk, high-stakes approach,” Tim Fox, chief economist at Dubai-based lender Emirates NBD PJSC, said Sunday in a Bloomberg Television interview. “It didn’t come together on Friday and I think market confidence that it will at some point in the next couple of weeks is actually quite low.”

The production increase and deep discounts mark a dramatic escalation by Prince Abdulaziz bin Salman, the Saudi oil minister, after his Russian counterpart Alexander Novak rejected an ultimatum on Friday in Vienna at the OPEC+ meeting to join in a collective production cut. After the talks collapsed, Novak said countries were free to pump-at-will from the end of March.

Record Discounts

With jet-fuel, gasoline and diesel consumption rapidly falling due to the economic impact of the coronavirus outbreak, the energy market now faces a simultaneous supply-and-demand shock.

After the failure in Vienna, Riyadh responded within hours by slashing its so-called official selling prices, offering record discounts for the crude it sells worldwide. Aramco tells refiners each month the prices for its crude, often adjusting the OSPs by a few cents or as much a couple of dollars.

But in a notice to buyers sent Saturday, Aramco announced it was slashing most official prices by $6-$8 a barrel across all regions. The dramatic move will resonate beyond Saudi Arabia. The kingdom’s pricing decision affects about 14 million barrels a day of oil exports, as other producers in the Persian Gulf region follow its lead in setting prices for their own shipments.

Bloomberg
Javier Blas and Anthony DiPaola
Bloomberg March 8, 2020

Volatile gold slides from 7-year peak as traders cover margins

Volatile gold slides from 7-year peak as traders cover margins

* Gold still on track for best week since Feb. 2016

* Global stocks, oil tumble; U.S. Treasury yields at record low

* Platinum climbs over 3%; set for best week in seven

– Gold prices swung more than 1% on

Friday, sliding from a seven-year high as investors sold the precious metal to cover margin calls as the rapid spread of the coronavirus hammered equity markets.

Spot gold was up 0.1% at $1,671.24 per ounce by 1:58 p.m. EST (1858 GMT). U.S. gold futures settled 0.3% higher $1,672.40.

Gold jumped 1.2% to its highest since January 2013 at $1,689.65 earlier in the session, but then shed all those gains to drop as much as 1.4%. "We are seeing a lot of volatility in the equity markets, fairly large losses and uncertainty bringing the S&P below 3,000. We are most likely seeing liquidation of gold in order to cover margin calls," said Bart Melek, head of commodity strategies at TD Securities. "This is very reminiscent of what happened in the corrections during the financial crisis."

U.S. stocks tanked and the Dow Jones Industrials shed nearly 2%, while government bonds rallied as traders worried about a prolonged economic slowdown. Oil prices also collapsed more than 8% to their lowest levels since mid-2017. "This dip (in gold) should be bought up fairly quickly as the day goes on. As long as this virus is in the headlines out there, expect gold to continue higher," said Bob Haberkorn, senior market strategist at RJO Futures. Despite the losses, safe-haven gold is still on course for its biggest weekly gain since February 2016.

Nearly 60 new coronavirus cases were confirmed in the United States on Thursday. Globally, virus cases surpassed 100,000 and over 3,300 deaths have been reported.The International Monetary Fund on Wednesday said the outbreak would hold 2020 global output gains to the slowest pace since the 2008-2009 financial crisis. The epidemic poses "evolving risks" to the U.S. economy and central bank officials are monitoring developments closely, New York Federal Reserve President John Williams said on Thursday.

The Federal Reserve made an emergency 50-basis-point interest rate cut on Tuesday, its first inter-meeting cut since 2008. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

U.S. nonfarm payrolls data showed a robust increase in hiring in February, but the report may not reflect the full impact from the outbreak.

Palladium dipped 0.5% to $2,520.92 per ounce and silver was down 0.9% at $17.26 an ounce.

Platinum rose 3.1% to $891.08, on track to post its best week since mid-Janaury.

The second-largest platinum group metals producer, Anglo American Platinum , had slashed its output outlook dueto a shutdown following an explosion.

 

By Harshith Aranya
March 6 (Reuters)

 

Gold Reclaims its safe-haven allure

Gold Reclaims its safe-haven allure

The last couple of weeks have contained extreme volatility in both the equities markets as well as the safe haven asset group. When U.S. equities began to selloff dynamically, we saw gold follow in tandem trading to lower pricing. It was not that gold lost its safe haven luster, rather it was mass liquidation of all assets as traders went either into cash or bonds.

However many gold enthusiasts believed that at some point if the equities markets continued to trade lower due to the coronavirus, and there was no real hope for a quick discovery of a vaccine for this disease that safe haven assets would once again be one of the most logical and solid places to park your money as equities ran to new lows.

On Friday of last week, we saw gold have its last dynamic drop in which it opened at approximately $1646, and closed and closed just above $1560. This was the last major decline in gold last week. Although this week started off with a whimper it did close above Friday’s close, however it had a very small range between its open and closing price creating a candlestick called a “Doji”.

While this particular candlestick can indicate indecision in the market, a point in time which neither the bullish or bearish faction can maintain dominant control, it can also indicate the time in which one faction loses control as the other faction regains dominance. In the case of Mondays “doji” candle it was a clear indication that the bearish faction had lost control and a pivot, or key reversal was about to begin.

What followed was a $42 upside move when on Tuesday the Federal Reserve announced an emergency rate cut in between FOMC meetings. This highly unusual action was in tandem with similar moves by other central banks globally. This signaled at least in the minds of central bankers that the current coronovirus, was continuing to spread and more importantly the possibility of an epidemic in China becoming a global pandemic increased.

Yesterday’s action was similar to Monday’s in that although it contained a higher high and a higher low, the open and closing range was very narrow. Even though yesterday’s high was slightly above Tuesday’s high, the high on Friday and Tuesday were exactly the same which technically created a double top. When gold traded above that top today it changed the short-term outlook and confirmed that there is a high probability that the rally which began this week could in fact challenge the yearly high of $1691 per ounce.

When you create a retracement from the high achieved on February 24 at $1691 to Friday’s low, the 61.8% Fibonacci retracement occurs at $1643. The fact that gold broke and closed above both the 61.8% retracement and the double top created from Friday’s and Tuesday’s highs is extremely significant.

Wishing you as always, good trading,

 

By Gary Wagner
Contributing to kitco.com