Adrian Day: Fundamentals for Gold are Positive

Release Date: 
Friday, October 10, 2014

Gold and Silver Prices

Gold and silver prices posted solid gains this week, touching a three-week high following the release of the Federal Reserve’s minutes for its September policy meeting. “Gold prices locked in their largest gain in more than a month on Thursday as investors wagered that the dovish bias in the Federal Reserve’s September meeting minutes would translate into a weaker dollar and an extended period of low interest rates…‘The Fed minutes really heated up the gold market,’ said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. ‘The market is digesting the fact that rates aren’t going up in the near term, and expectations for a rate increase are being adjusted by most traders to a year out,’ Mr. Haberkorn said.” (“Gold Prices End at Three-Week High,” Wall Street Journal, 10/9/14.)

Gold finished the week at $1,223.30, up $31.60. Silver prices were up $0.46, closing at $17.42.

Adrian Day: Fundamentals for Gold are Positive

Adrian Day, president of Adrian Day Asset Management, cited several reasons that his outlook for gold remains bullish.

“‘Dollar strength lays the seeds of its own destruction,’ Day says, noting this could hurt the U.S. trade picture. ‘The U.S. economy is not so strong that it can withstand a higher dollar; already several Fed officials have expressed concern and if the balance of future economic reports turns soft, one can expect more dovish comments from the Fed.’ Meanwhile, he says the ‘fundamentals for gold remain positive,’ with new mine supply growing at only a moderate rate and good demand expected from China, India and the Middle East. ‘Central banks continue to accumulate, with suspicions China is looking to build reserves,’ Day says. He also cites concerns about ‘monetary fragility, easy money around the world, and debt levels increasing even (as) economic growth slows, making debt service more problematic.’ Gold could be ‘close to a turn,’ Day says. ‘The dollar has moved too far, too fast, in defiance of fundamentals. Gold is testing a level where it has found support three times in the past year…if it holds, we could see a very strong rally.’” (“Adrian Day: ‘Fundamentals For Gold Remain Positive’,” Kitco News, 10/7/14.)

JP Morgan Hack May Be Warning of Future Crippling Cyber-Attack

Reports came out this week regarding recent cyber hacks on financial institutions, and that they could have been far more damaging for the industry.

“The huge cyber-attack on JPMorgan Chase that touched more than 83 million households and businesses was one of the most serious computer intrusions into an American corporation. But it could have been much worse. Questions over who the hackers are and the approach of their attack concern government and industry officials. Also troubling is that about nine other financial institutions — a number that has not been previously reported — were also infiltrated by the same group of overseas hackers, according to people briefed on the matter. The hackers are thought to be operating from Russia and appear to have at least loose connections with officials of the Russian government, the people briefed on the matter said.”

“Some American officials speculate that the breach was intended to send a message to Wall Street and the United States about the vulnerability of the digital network of one of the world’s most important banking institutions…Several financial regulators have warned that a coordinated attack on the banking system could set off another financial crisis.” (“Hackers’ Attack Cracked 10 Financial Firms in Major Assault,” New York Times, 10/3/14.)

Brookings Institute: Economic Impact of Ebola Could Be “Devastating”

The Brookings Institution believes the economic impact of an Ebola outbreak in the U.S. could have grave consequences for the economy.

“To better understand what Ebola could do to the United States, it might help to look at what it’s done in the economies of West Africa, where the virus has wreaked havoc on the lives and livelihood of thousands of people. The CDC reports more than 3,300 people have died from that outbreak and more than 7,100 cases have been reported.

“According to the Brookings Institution: ‘In addition to the enormous and tragic loss of human life, the Ebola epidemic is having devastating effects on these West African economies.’

“The outbreak has impacted nearly every sector of economic life. For example, quarantines mean goods cannot be transported and trade stalls. In West Africa – trade accounts for anywhere from 20-75% of GDP. Agriculture is impacted – infected people are unable to plant crops and shortages are driving food prices up. Still, ‘the most influential factor constraining economic activity there is fear.’ That’s precisely what economists like [Chief Economist at RBS, Michelle] Girard worry about with Ebola in the U.S.” (“Ebola could hurt U.S. economy,” Yahoo Finance, 10/3/14.)

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Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:

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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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