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Gold and Silver Prices
Gold prices retreated this week on a stronger dollar as the eurozone continued to negotiate with Greece over its massive debt.
“Gold slid to three-week lows on Friday as the euro slipped against the dollar on caution ahead of crunch talks on Greece this weekend, with concerns over the longer-term outlook for the metal also weighing on prices. Greece failed again to clinch a deal with its international creditors on Thursday, setting up a last-ditch effort on Saturday either to avert a default next week or start preparing to protect the euro zone from financial market turmoil.” (Gold hits 3-week low ahead of talks to clinch Greek debt deal,” Reuters, 6/26/15.)
Gold finished the week down $27.10, closing at $1,174.20. Silver prices closed the week at $15.85, down $0.33.
Gold Above $2,000 By 2018: Incrementum AG
In its newly released gold report, asset and wealth management company Incrementum AG sees resumption of the secular gold bull market and a price target of $2300 by mid-2018.
“The global financial architecture remains in a fragile state. Disinflationary forces have dominated since 2011. The systemic instability between inflation and deflation – monetary tectonics – culminated in a “disinflationary earthquake” in the second half of 2014, as all industrial commodities and every paper currency lost enormous ground against the US dollar.
“Widespread, chronic over-indebtedness is ratcheting up the pressure on monetary authorities to break the deflationary trend and finally generate rising price inflation rates. Gold has always been the best hedge against excessive inflationary efforts.
“We are convinced that we are now close to a decisive fork in the road: the disinflationary trend will (have to) be broken. Rising price inflation rates are possible both in conjunction with a revival in economic activity and in a stagflationary environment. In both cases, inflation-sensitive investments including gold … will benefit…
“Based on the “big picture” analysis that is packed into this report, we see no reason for a change of course: In gold we (still) trust. We are firmly convinced that gold remains in a secular bull market that is close to making a comeback. We expect to see a final trend acceleration at the end of the cycle. We thus decided to set a time horizon of three years – June 2018 – for our long-term price target of USD 2,300 to be reached. (“In Gold we Trust 2015 – Extended Version,” Incrementum AG, 6/25/15; original emphasis.)
Investors Need Gold and Silver because of Systemic Risk Says Senior Fund Manager
Ian Spreadbury, who manages more than $6 billion, is warning investors to diversify with assets such as gold and investors because of the risk of a systemic event which will “rock markets.”
“The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress. Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity... is concerned that a ‘systemic event’ could rock markets, possibly similar in magnitude to the financial crisis of 2008…
“’Systemic risk is in the system and as an investor you have to be aware of that…’ The best strategy to deal with this, he said, was for investors to spread their money widely into different assets, including gold and silver, as well as cash in savings accounts… His concern is that global debt – particularly mortgage debt – has been pumped up to record levels, made possible by exceptionally low interest rates that could soon end, and he is unsure how well banks could cope with the shocks that may await.” (“'It's time to hold physical cash,' says one of Britain's most senior fund managers,” The Telegraph, 6/20/15.)
Bullish Forecast for Gold for Remainder of 2015
The team at Money Morning released a bullish analysis of the gold market for the second half of 2015.
“Our gold forecast for the rest of 2015 shows three big factors affecting the direction of the yellow metal… Investors are bulking up on safe-haven gold to guard their wealth against the possibility of a Greek debt default. They also think an ensuing exit from the currency union will destabilize the euro. Gold is widely recognized as an alternative currency. It's also used as a reserve asset by the globe's largest central banks.
“And central banks have loved gold lately – another reason we're bullish. ‘Central banks have remained conspicuous net buyers (of gold), with the current trend now stretching into 17 consecutive quarters…’
“Further supporting a bullish gold forecast are Asia's markets. Worries are escalating that China's booming stock markets are in a bubble…"’I am not suggesting that you invest exclusively in gold,’ Money Morning Chief Investment Strategist Keith Fitz-Gerald said… ‘But I am suggesting you buy it as part of an intelligently planned investment strategy…Gold has been proven to be a great crisis hedge and one that is more perfectly correlated to interest rates, which are, in turn, driven by inflationary pressures and global risk.’" (“New Gold Forecast Shows Bullish News for Prices,” Money Morning, 6/19/15.)
Chinese Gold Standard Could Lead to Currency “Fireworks”
Bloomberg reports that China is considering backings its currency with gold, a move that is considered to be a “game changer” for both China and the yellow metal…“This move, says Ken Hoffman, global head of metals and mining research for Bloomberg Intelligence, would be a ‘game changer…’
“Hoffman explains that Chinese policy makers are already trying to establish the yuan as a reserve currency, and backing it with gold would help attract foreign capital...Hoffman estimates that to create an exchange rate of one ounce of gold for every $64,000, the country would need about 10,000 metric tons of the metal. ‘That's nine times the national official holdings and about 6 percent of all the bullion ever mined globally,’ Hoffman says…
“If China decides to go into some form of a gold standard, Hoffman says it would make the rest of the world view the metal as a currency again. ‘If they go for it, we'd be talking about fireworks….’” (“Chinese Gold Standard Could Create 'Fireworks' - Bloomberg Intelligence,” Bloomberg, 6/25/15.)
Silver Could Easily Double: Lombardi
Financial commentator Michael Lombardi wrote that silver is currently undervalued and prices may double due to several factors.
“Historically, one of the most widely used (and accurate) tools to value silver has been the gold-to-silver multiple. This ratio tells us how many ounces of silver it costs to buy one ounce of gold. Currently, the gold-to-silver multiple sits at 74… From a historical perspective, since 1970, the gold-to-silver multiple has averaged 55.5. That means silver prices would have to rise to $21.00 an ounce today (from their current price of $16.00) for the historical average price relationship between gold and silver to be restored.
“The lagging gold-to-silver multiple isn’t the only multiple that suggests silver is undervalued. Basic economics say so as well… It’s basic economics; when prices decline for a commodity, producers and manufacturers have less incentive to produce and manufacture. On the demand side of the gold supply/demand equation, demand remains strong…
“As I have said in these pages before, I like to look at investment when it is down and out. In my books, lack of investor interest, bearishness towards the metal, and depressed prices all qualify silver as a down-and-out investment right now. In fact, over the long term, I believe silver will provide better gains to investors than gold. Here’s why: for silver to go up to 100%, it will have to go to $32.00—a level that has been seen many times before.” (“Silver Prices: Why They Could Easily Double from Here,” Profit Confidential, 6/19/15.)