Economist Warns Investors Not To Miss Gold Bull Market

Release Date: 
Friday, March 11, 2016

Gold and Silver Prices
Gold prices retreated on Friday as the dollar gained against the euro following news the European Central Bank lowered interest rates and implement new quantitative easing.

“Gold edged lower on Friday as the dollar rebounded, but prices remained within reach of a 13-month high touched in early trade after the European Central Bank's announcement of new easing measures. ECB President Mario Draghi rolled out steps on Thursday including increased asset buying and a deeper cut to deposit rates, but signalled there would be no further rate cuts…

“Gold has rallied about 20 percent this year, regaining its role as a shelter for risk-averse investors, in the face of tumbling equities and fears of a global economic slowdown. ‘Low or negative real rates and high risk premium can be very positive for gold,’ Deutsche Bank commodity analyst Michael Hsueh said… ‘The ratcheting back of policy expectations in the U.S., which has pushed us probably towards the more positive end of the real rates spectrum, coupled with weakness in equities, tends to have a positive influence for gold….’” (Gold price below 13-month top on dollar, heads for 2nd week of gains,” Reuters, 3/11/16.)

Gold ended the week down $9.00, closing at $1,251.10. Silver prices closed at $15.57, down $0.04.

Economist Warns Investors Not To Miss Gold Bull Market
Economist and financial analyst Dennis Gartman told CNBC that he is a strong believer in the new gold market and warned investors not to miss gold’s upward trend.

“’I am not a gold bug, I don’t like the gold bugs, I’m not a believer that the world is coming to an end, but I’m a believer in the gold market at this point…. The trend is up, the trend has been up for the last several months and I continue to think that as long as the monetary authorities are going to remain as expansionary as they are [this trend will continue],’ the editor and publisher of The Gartman Letter said in an interview with CNBC's ‘Futures Now’ on Thursday. "Monetary expansion equals higher gold prices."

“Investors have flocked into the precious metal this year as the market continues to weigh central bank policies and volatility in equities. The flood of buying has gold tracking for its best start to a year since 1974. The precious metal got an even bigger boost Thursday, rallying 1 percent after European Central Bank President Mario Draghi cut interest rates…

“’What Draghi said today turned the market… He has made it abundantly clear that he's going to throw more reserves into the system. The Bank of Japan is going to throw more reserves into the system. And the Fed will have no choice to at least hold monetary policy steady, if not become more expansionary following what the leads are from the ECB.’

“According to Gartman, all of those factors will continue to keep gold in the hands of the bulls. ‘Don't fade this trend,’ he added. (“Until this happens, keep buying gold: Gartman,” CNBC, 3/11/16.)

Gold Prices Expected To Climb Much Higher – Money Morning
Money Morning contributor Diane Alter told readers that central bank policies should send gold prices much higher.

“The price of gold is climbing more than 1% today after additional global monetary easing policies were announced. And we see the price of gold climbing much higher from here in 2016…

“Investors buy gold during turbulent markets, believing it will hold its value better than other assets when markets are unstable… [G]old prices rallied Thursday after the European Central Bank (ECB) announced additional monetary easing… And that wasn't the only monetary policy that sent the price of gold higher today…

“New Zealand's central bank, in a surprising move Thursday, cut its key interest rate … Citing global growth worries and weaker demand from China, the central bank signaled it could cut rates further to help boost growth.

“Investors worldwide have increasingly lost confidence in central banks. That lack of faith and negative-interest-rate policies have sent investors to safe-haven investments like gold. And that will only continue to push the price of gold higher from here…” (“Why the Price of Gold Is Climbing Today and Where It's Headed,” Money Morning, 3/10/16.)

Negative Interest Rates Good For Gold – Barron’s
The financial magazine Barron’s explained why the growing move towards negative interest rates is positive for gold.

“Early last year, after yields on ultra-safe Swiss government bills turned negative, Jeffrey Gundlach quipped that gold (with zero yield) might start to lure yield-hungry investors. Everyone had a good laugh.

“The joke isn’t quite so funny these days. A growing number of monetary authorities — European Central Bank, Switzerland, Denmark, Sweden and Japan — are embarking on so-called negative interest rates, effectively charging depositors to park money on their books. Where are investors supposed to park their money? …

“Strategas Research Partners on Monday …  said it was bullish on gold in part because of the negative interest-rate environment. They explain: ‘A more widespread adoption of negative interest policies (NIRP), however, leads us to believe that bank profitability may be impaired worldwide… Finally, it can be said that, perhaps for the first time in recorded history, gold may have a somewhat durable positive carry. We have increased our exposure to precious metals as a result…’

“Nicholas Colas, chief market strategist at brokerage Convergex, notes that gold prices rose not only during early-year turmoil, but also during the three-week rally that carried through Friday. He explains: ‘After a long and painful bear market, gold should get a bounce. If financial assets can really improve on recent gains, that will eventually pull money from all risk hedges, including gold.  But if we do see more volatility in 2016 – and that is our base case scenario – then gold should prove resilient.  Bottom line: we think gold does move higher from here in 2016.’” (“NIRP Is Good News For Gold Prices,” Barron’s, 3/7/16; original emphasis.)

Gold is A “Crisis-Nullifier” For Your Portfolio – Business Insider
A Business Insider commentary advises investors to include gold in their portfolio to help guard against the myriad of threats to the U.S. and world economy.

“It seems like almost every day we’re hit with another piece of downbeat news. But it isn’t just that the news is negative. It’s turned, well, wacky. Eyebrow raising. Credibility straining. Confidence eroding. As soon as I get used to the latest central bank oddity, another one gets dumped on me. I feel like I better get out soon, or my portfolio will get boiled to death.

“[S]even unhealthy economic and monetary trends … stand in stark contrast to what is historically ‘normal.’ When taken together they suggest that, like JP Morgan just recommended, we should be overweight gold…

“You don’t need to be a gold bug, or a conspiracy nut, or a doomsday prepper to buy gold. Nor do you need to believe those claims that it’s going to $10,000 an ounce, folks! You buy gold because negative rates are not healthy and will probably come with some nasty consequences that gold can shield you against. Or because the Fed and other central bankers have very limited ability (some say no ability) to steer the economy and markets out of the corner they’ve backed us all into…

“I think it’s prudent for everyone to consider buying some gold at this point in history. Placing 5%–10% of your assets in bullion adds a crisis-nullifier to your portfolio….” (“7 signs you might want to be overweight gold,” Business Insider, 3/8/16.)

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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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