“In Chaos, Gold Rules Supreme” - Leeb

Release Date: 
Friday, August 26, 2016

Gold prices seesawed on Friday as investors digested Fed Chair Janet Yellen’s comments at the Federal Reserve meeting held in Jackson Hole, WY.

"Gold prices fluctuated between gains and losses on Friday, after a speech by Federal Reserve Chairwoman Janet Yellen failed to convince traders that the central bank will raise interest rates in the coming months… At the Jackson Hole Symposium on Friday, Ms. Yellen said concerns about economic growth have eased, and that the possibility of an interest-rate increase will continue to be influenced by economic data…

“While Ms. Yellen’s comments leave the door open for a rate increase in September, gold’s gains reflect the market skepticism of seeing a rate increase in the near term. ‘There’s just no way that the Fed is going to move. I just don’t see it,’ said Peter Hug, global trading director at Kitco Metals. ‘Everything Janet Yellen said this morning indicates there’s been no change in Fed policy.’ Traders also said other catalysts to drive gold higher, such as economic uncertainty and negative interest rates around the world, remain in place….” (“Gold Prices Swing Following Yellen’s Speech,” WSJ, 8/26/16.)

Gold ended the week down $20.60, closing at $1,321.50. Silver prices closed at $18.75, down $0.61.

“In Chaos, Gold Rules Supreme” - Leeb
Economist and financial author Dr. Stephen Leeb told King World News that gold could ultimately become the sixth currency in the IMF’s Special Drawing Rights (SDR) leading to the greatest bull market in history.

“The world’s monetary system is busted. Unless it is fixed pronto, prospects for worldwide growth are nil, while prospects for worldwide chaos are high. And never forget: in chaos, gold rules supreme…

“One possible form chaos could take would be galloping commodity prices. An alternative form would be a vicious deflationary cycle in which prices and growth crash and burn. Either way, gold would be the one real shelter. When commodities are soaring, paper money becomes second-class; no one will turn over something with intrinsic value, namely commodities, for mere pieces of paper. As for deflation, over the past 500 years or more whenever deflation emerged, gold gained and sometimes gained big in terms of purchasing power…

“We’ve been talking mostly about the West, but China and the East fear the infectious nature of Western chaos…Although China’s massive hoard of gold offers some insurance, on its own it’s not a ticket to growth. Western markets are still essential.

“That means a new monetary order must replace the existing one as soon as possible. It will be one that China is determined to dominate, not for the sake of hegemony but to ensure long-term growth. And it will involve gold – which will become not just an insurance policy but a ticket to growth…

“Since the early 1970s policymakers have raised the idea of substituting SDRs for dollars. SDRs, created by the IMF in the late 1960s, are a weighted combination of major currencies and are issued by the IMF… this October barring some catastrophe the yuan will become the fifth SDR currency, and with a weighting greater than that awarded the pound and yen, though less than the dollar and euro…

“China’s own development banks – including the under-the-radar China Development Bank and the Export-Import Bank – have assets amounting to more than $2 trillion in the East, far more than all Western development banks combined… A relevant question is whether the Chinese could be enticed to denominate that $2 trillion in SDRs and pledge to carry out all future development in the East, a task that will amount to tens of trillions of dollars, in SDRs if the yuan has just a 10 percent weighting?

“The answer is a qualified yes. For China to do so, there would have to be a sixth member of the SDR basket. You guessed it – it’s gold. Gold taking on a role in the SDR basket is essential if the world economy has any chance of righting itself. [Gold as the sixth component of the SDR] would provide the best chance to save the world – while ensuring that we will see a bull market in gold that will dwarf any bull market we’ve ever seen.” (“This Historic Event Is About To Shock The World,” KWN, 8/20/16.)

Gold Breakout in September – Aaron
Christopher Aaron, a former CIA counter-terrorism officer and current currency and commodity analyst, wrote that gold prices should see a breakout in September.

“Gold has been consolidating for most of the summer with resistance sloping downward at the aforementioned trend line…and support coming in near $1,310… Seasonally speaking, this consolidation has taken place during the weakest time of year for gold – i.e. the summer. A consolidation during the weakest season of the year actually shows a cyclical relative outperformance. New buyers are stepping in and metal is being transferred from weak to strong hands throughout this consolidative process.

“Of course September coming up is the single strongest month of the year for gold based on data available for monthly trends. Much of this demand comes out of India prior to the traditional wedding season, which is in October. Let us not overlook: gold demand out of India is a critical component of the physical market. Indeed, India consumes more gold than any country outside of China. For perspective, Indian demand is greater than that of the United States and Europe combined. And, most of this demand occurs in September prior to the wedding period…

“Could there be an additional economic reason for gold to stage a rally this autumn? We believe there is a strong possibility of something negative brewing in the currency markets for the US dollar -- and typically a weak dollar causes investors to flock to precious metals… Gold is consolidating just below a key technical breakout point during this, the end of the weakest time of the year for the precious metals. Strong seasonal demand is expected out of India next month. The US dollar is vulnerable to a breakdown should a failure at the recent trendline occur. Those without sufficient exposure to the precious metals complex at this juncture should consider any remaining late-summer weakness as an opportunity to finalize their medium-term positions.” (“Gold Price Forecast: Watch for a September Rally,” Gold-Eagle, 8/24/16.)  

Fund Manager Sees $1900 Gold, $25 Silver
Guild Investment Management founder Monty Guild told Kitco News that the “global irresponsibility” will send gold prices to $1,900 and silver to $25 an ounce.

“We are not traders, we’re investors, and we see this as a buying opportunity… Gold has been benefited from deflationary impulses and fears throughout the world and also depreciating currencies. We believe the continuation of depreciating currencies will help gold and one off events… these kinds of things will come all over the world as the current global irresponsibility continues in coming decades. So over the next couple of years we anticipate that gold will move up to $1900 again… by 2018 … silver we think $25+ within a year….”  (“Why This CEO Sees $1,900 Gold, $25 Silver On The Horizon,” Kitco News, 8/24/16.)

 

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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