Gold and Silver At Turning Point – Nathan

Release Date: 
Friday, October 16, 2015

Gold and Silver Prices
Gold prices retreated marginally on Friday as investors locked in gains and reacted to a stronger dollar. However, the yellow metal held on to much of its earlier gains to end the week in positive territory.

“Gold prices pulled back from a three-month high Friday on pressure from a stronger dollar and as some investors moved to lock in gains on the recent rally… Prices had rallied to $1,187.50 an ounce on Thursday, their highest level since June 19, after weak U.S. economic data fueled speculation that interest rates would remain lower for longer. The Federal Reserve voted to keep rates pinned near zero in September, and some investors now expect the U.S. central bank to stand pat on monetary policy through the end of 2015. Any delay to higher rates benefits gold, which has an easier time competing with Treasury bonds when rates are low.” (“Gold Backs Off Three-Month High on Dollar Strength,” WSJ, 10/16/15.)

Gold finished the week up $21.30, closing at $1,178.70. Silver prices closed the week at $16.06, up $0.14.

Gold and Silver At Turning Point – Nathan
Kitco commentator and author of The New Gold Standard, Paul Nathan, told investors that gold and silver were at a turning point and everyone should own gold and silver coins.

“I think we may have reached a very important turning point in the gold market. Needless to say when I use the term gold I am also referring to silver since they move in tandem more or less… I think the odds have increased that we are about to see a major move in the precious metal sector. The long bear market in commodities that began in 2011 may be over and a new bull market may be beginning….

“Everyone should have some assorted gold and silver coins, plus some physical cash on hand. These are for protection against hack attacks that can close banks and ATM's. It's insurance against a major financial crisis that can lead to a banking crisis. And it’s insurance against a major inflation if monetary policy turns aggressively expansive…

“Personally, I think we’ve seen the lows in precious metals and could see a very good rally in the months to come. As of now, I’m positioned for that rally.” (“An Investment Guide For A New Bull Market in Precious Metals,” Kitco, 10/15/15.)

Five Reasons Gold Prices Will Rise – Forexlive
Forexlive’s currency analyst Adam Button offered five reasons gold prices should rise.

  1. “The technicals are turning higher…
  2. “US dollar weakness… The dollar has begun to slide and the popular dollar trade could lead to a quick moves to the exits, which will boost the price of gold in US dollar terms.
  3. “Dovish central banks… The Federal Reserve was supposed to have hiked rates by now, ending the era of easy money that sent gold to all time highs. It hasn't happened and the derivatives market prices a more than 60% chance it won't happen this year. But it's not just the Fed, the European Central Bank is also battling disappointing growth and Japan could be headed towards its fifth recession in the past 10 years.
  4. “Better emerging market sentiment… The story of the mini-panic in August was fear about China and emerging markets. That has been dissipating and will help to underpin gold.
  5. “Production cuts… The major story in corporate mining this month is Glencore… They shuttered production to cut costs… the market reads that as a sign that other cash-strapped companies may soon do the same.” (“Five Reasons to Bet on Gold,” Forexlive, 10/10/15.)

World Economic Order Is Collapsing – The Guardian
The Guardian columnist Will Hutton painted a grim assessment of the world economy, warning readings that a collapse of our current system seems inevitable.

“Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing.

“Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China... Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation.

“The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (£1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international co-ordinated response, no progress is likely…

Andy Haldane, Bank of England chief economist, describes the unfolding pattern of events as a three-part crisis. Act one was in 2007-08 in Britain and the US… Act two was in Europe in 2011-12, when it became obvious that the lending had been made on the incorrect assumption that all eurozone countries were equal… Now act three is beginning, but in countries much less able to devise measures to stop financial contagion and whose banks are more precarious… Money is flooding out of the [Emerging Market Economies], leaving overborrowed companies, indebted households and stricken banks…

“The world needs inventive responses… It needs proper surveillance of global finance. It needs western governments to launch massive economic stimuli, centred on infrastructure spending. It needs new smart monetary policies that allow negative interest rates. None of that is in prospect, vetoed by an ideological right and not properly championed by the left. If there is no will to deal, collectively, with the refugee crisis, there is even less to reorder the global economy. We may muddle through, but don’t bet on it.” (“The world economic order is collapsing and this time there seems no way out,” The Guardian, 10/10/15.)

China Adds Gold to Its Reserves for Third Straight Month
Reuters reported that China added more gold to its reserves and lowered its foreign exchange reserves for the third straight month.

“China increased its gold holdings by nearly 1 percent in September even as total foreign exchange reserves dipped, central bank data showed on Friday… ‘Their buying has been pretty consistent,’ said Victor Thianpiriya, commodity strategist at ANZ. ‘It's clear that they consider gold to be an important part of their holdings. So it won't surprise me if they continue to add to reserves…’

“The rise in China's gold holdings comes at a time when its total foreign exchange reserves are falling as the central bank steps up intervention to stabilise the yuan currency… Gold reserves still make up only 1.7 percent of China's total reserves, according to Reuters calculations, a factor the market believes will drive the PBOC to continue buying… China should increase its gold holdings to around 5 percent of its total reserves to help diversify currency risks, a WGC official said earlier this year.” (“China adds more gold to reserves in September,” Reuters, 10/16/15.)

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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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