2017 Is Turnaround Year For Gold – Aden Sisters

Release Date: 
Friday, October 28, 2016

Gold prices moved higher this week with a bounce on Friday as bargain hunters bought gold ahead of a GDP report which may provide signals about a future Fed rate hike.

“Gold prices have pushed above unchanged and are modestly higher in morning dealings Friday. The yellow metal traded weaker overnight and fell under some more pressure after the release of a stronger-than-expected U.S. GDP report. However, traders then stepped in and bought the lower price levels to push prices back above unchanged…” (“Gold Turns Higher As Bargain Hunters Buy The Dip,” Kitco, 10/28/16.)

Gold ended the week up $24.20, closing at $1,275.70. Silver prices closed at $17.83, up $0.13.

2017 Is Turnaround Year For Gold – Aden Sisters
Noted analysts and publishers of the Aden Forecast, Mary Anne and Pamela Aden, believe that 2017 will be a turnaround year for gold making it a perfect buying opportunity for the yellow metal.

“We see this as a turning point; we’re calling it a turnaround year going from the four year bear market to a bull market. This is the first great rise and now the correction’s coming and we think it’s a great buying time, in fact… Just recently, with gold coming down we think it will be providing, because the major bull market is still in force, so this is a good buying opportunity despite even the downward correction we’ve seen recently, gold, silver … have been the top performers for the year, they’re doing great and we think there’s a lot more to come… We think the dollar will resume its decline as gold moves up…. We think this is a good buying opportunity … and to be buying now…. ” (“This Is Gold's Turnaround Year - Aden Sisters,” Kitco, 10/27/16.)

Gold Plays Important Role In Mitigating Portfolio Risk – WGC
In the World Gold Council’s October 2016 report, Mohamed El-Erian, chief economic adviser at global insurer Allianz and dubbed one of the ‘Top 100 global thinkers,’ discussed the challenges faced by investors and the importance of gold in today’s uncertain environment.

“A prolonged period of low and, especially, negative nominal interest rates was once thought unlikely if not unthinkable. It is now reality, with some 30% of global government debt trading at negative yields. While some of the consequences for investors have transpired or are in the process of doing so, I suspect that many more are yet to play out.

“Ultra-low interest rates entice investors to stretch much more for returns. Combine this with repressed financial volatility, another objective of unconventional central bank policy, and you could well end up with excessive risk-taking on the part of too big a portion of the investor base. In the process, market valuations decouple meaningfully from underlying economic and corporate fundamentals…

“Given that we are essentially in unchartered waters, we do not as yet have a good enough handle on how modern market-based economies operate when faced with a prolonged period of artificial pricing. There is a sense that the risk of collateral damage and unintended consequences is meaningful, but specificity is understandably hard to pin down with sufficient conviction.

Unless validated by improving economic and corporate fundamentals, investors face major uncertainty with respect to the trio that determines their wellbeing – that is, expected returns, volatility and correlations between asset classes… The institutional setup is also in play, including a growing threat to the political autonomy of central banks.

“These are some of the known unknowns… and then there is the even more uncertain issue of the unknown unknowns – all of which speak to the ‘unusual uncertainty’ facing investors… As part of a diversified portfolio allocation that includes a higher-than-usual cash allocation, gold can play an important role in overall risk mitigation. It can also provide a notable upside should the enormous amount of central bank liquidity injection gain traction and result in higher inflation, be it actual or expected.  Having said that, investors should size their gold allocation in a manner that enables them to stomach considerable mark-to-market price fluctuations. Otherwise, they run the risk of doing the wrong thing during periods of unsettling market volatility….” (“Smart investing in a low-interest rate world,” WGC “Gold Investor,” 10/16.)

Supply Crunch To Boost Platinum Prices – Bloomberg
Two South African fund managers believe a looming supply crunch will boost platinum prices which are currently below the price of gold.

“Two of South Africa’s biggest fund managers are going against the tide in the platinum market by betting on higher prices. The metal fell into a bear market this month and U.S. money managers have cut bullish bets for 10 straight weeks, the longest stretch in at least a decade. That hasn’t dented Coronation Asset Management and Investec Asset Management’s view that a long-term supply crunch in South Africa, which produces 70 percent the world’s platinum, will boost prices.

“’A supply cliff is approaching so we see substantial deficits in the years ahead, and much higher platinum-group prices as a result,” John Biccard, a Cape Town-based fund manager at Investec, said by phone. “Given that deep mine shafts in South Africa may take up to a decade to build, we don’t expect a quick remedy to the situation…’

“Even Terence Goodlace, the chief executive officer of Impala, admits industry warnings about a supply crunch have so far done little to boost prices. That’s because while safety stoppages, power blackouts and labor protests helped cause annual supply shortages since 2012, there’s enough metal held above ground to satisfy demand. During an unprecedented five-month mine strike in 2014, prices barely moved.
‘You can say we’re the boy who cried wolf - until the wolf bites you,’ said Johan Theron, a spokesman for Johannesburg-based Impala…

“Plunging output will eventually boost prices, said Neill Young, a fund manager at Coronation, which manages $44 billion and has 8 percent of its equities in platinum-related stocks, compared with about 2 percent of an index average. ‘Exactly when it happens is quite difficult to call,’ Young said. ‘In time, there will be an increasingly realization that the market is in fundamental deficit….’” (“Platinum Bulls Look Past Price Slump to Bet on Supply Crunch,” Bloomberg, 10/27/16.)

Gold to $1450 In 2017 – Commerzbank
In its “Commodity Spotlight Precious Metals,” Commerzbank reaffirmed its forecast that gold will rise to $1450 by the end of 2017.

“One key question with respect to the future performance of the gold price will be the future monetary policy pursued by the US Federal Reserve. The rate hike we expect to be implemented in December has not been fully priced in as yet. According to the Fed Fund Futures, the probability of this happening is approx. 70% at present. One possible obstacle is the US presidential election that will be held on 8 November. Accordingly, the gold price could come under renewed pressure if Hillary Clinton were to come out on top. As long as the market does not begin to price in a series of interest rate hikes, this weakness should only prove temporary. The reduction in speculative net long positions is likely to come to a gradual halt, meaning that the selling pressure from this side should abate. The fact that physical demand in India is already picking up should also preclude any more pronounced price slide…We are nonetheless lowering our year-end forecast to $1,250 per troy ounce. The gold price should resume its upswing next year. One argument in favour of this is the extremely expansionary monetary policy that is still being pursued by the key central banks. Then there are the numerous uncertainties associated with several important elections in Europe and the various geopolitical risks. The dynamism of investment demand should therefore pick up again, which is why we are leaving our forecast of a gold price of $1,450 per troy ounce by the end of 2017 unchanged….” (“Commodity Spotlight Precious Metals,” Commerzbank, 10/28/16.)

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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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