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Gold and Silver Prices
In the last full trading day of the week, gold prices fell despite growing concerns of a Greek exit from the Eurozone. Prices were somewhat supported by a tepid U.S. jobs report which indicated continued weakness in the economy.
“Gold cut some losses on Thursday, rebounding slightly from a 3-1/2 month low after data showed the U.S. labour market to be weaker than expected in June, indicating that the Federal Reserve could hold off from raising interest rates in September… Gold prices have been hamstrung by the prospect of higher U.S. interest rates this year, which would increase the opportunity cost of holding the metal. The market was also following developments in the Greek debt crisis, which has so far failed to trigger strong retail demand for the metal, which is often perceived as a safe-haven asset…
“Prime Minister Alexis Tsipras has urged Greeks to reject an international bailout deal, wrecking any prospect of repairing relations with European Union partners before a referendum that could decide Greece's future in Europe. There is scope for the Greek crisis to drive more risk-averse money into gold if it worsens to the point where Greece leaves the euro zone, or if there is contagion in other economies in the bloc, such as Italy, Portugal or Spain, traders said.” (“Gold above 3-1/2 month low after U.S. jobs data,” Reuters, 7/2/15.)
Gold finished the week down $7.50, closing at $1,166.70. Silver prices closed the week at $15.78, down $0.07.
Gold Ready to Rally – Kitco Commentator
Kitco Commentator Stewart Thomson is bullish on gold due to several world factors.
“As the crisis in Greece (and now Puerto Rico) intensifies, Global markets (except gold) are tumbling… Greek banks are closed, and the situation looks grim… In my professional opinion, Greek citizens will probably vote ‘Yes’ to stay in the EU, but will leave anyways in a few weeks. Their sovereign debt crisis won’t be solved by borrowing even more money…
“In time, the US government will probably default on its debts, but it will be quite a long process, featuring an ongoing drop in the standard of living of most US residents… The US economic upcycle is almost eight years old. Growth is not surging, and while I don’t see Greece as a domino like Lehman was, most Western countries have debt problems that could easily become similar to the problems of Greece…
“Generally speaking, gold tends to decline in the first half of the year, and rally in the second half. Today is last day of June, and so gold can be said, generally speaking, to be ending the weak season, and beginning its strong season…
“Nobody loves gold more than the citizens of India. The country’s mines have all been depleted, and the government has used that fact as an excuse to impose massive duties on imports. Both China and India are moving quickly to find large amounts of gold in the sea, and this should encourage the government to end the duties. Supply from conventional mines and Western investors is dwindling, so I don’t think the coming seabed discoveries will affect the gold price adversely. It’s a win-win situation for all stakeholders, in what I call… the gold bull era! (“Greece Burns & Gold Prepares To Rally,” Kitco, 6/30/15; original emphasis.)
Signs Point to Higher Gold Prices
The financial website Streetauthority penned a commentary for NASDAQ urging investors to look at gold.
“In the face of historic monetary stimulus from nearly every major central bank in the world over the past few years, an investment in gold would have seemed to be a ‘no-brainer.’ Yet the precious metal's price, around $1,178 per ounce, has barely budged. Now may be the time to give gold a fresh look. Fundamental drivers appear in place for long-term upside, and technical support could provide a near-term catalyst…
“Gold's recent subdued performance can be attributed to tepid global growth that has kept inflation at bay. Yet there are signs that both are on the way up… While the Federal Reserve has come off its historic monetary easing programs, the Bank of Japan and the European Central Bank are still pursuing them: the Bank of Japan is injecting 80 trillion yen per year into its financial system and the ECB will have pumped more than $1 trillion into its financial system by September 2016.
“Those actions should help underpin economic growth. And higher inflationary expectations may not be too far off. The International Monetary Fund estimates that nearly every developed economy is on the verge of accelerating inflation.
“Beyond the economic impetus for gold prices, falling capital expenditures by the largest gold miners could limit supply growth over the next several years. The average capital investment last year by the five largest miners was less than half of that spent in 2012…
“Meanwhile, the current Greek crisis may lead to a win-win situation for gold investors. Volatility has jumped with the possibility of a Greek default and gold prices have held up as invests rush back to the safety of the yellow metal. If a deal is eventually reached to avoid a Grexit, then the U.S. dollar would likely fall as investors look for higher-yielding opportunities internationally. This should send gold prices soaring since the metal is priced in dollars.” (“All Signs Point To Higher Gold Prices,” NASDAQ, 6/30/15.)
Fed Rate High Could be Good For Gold - Handwerger
Financial writer Jeb Handwerger explains why the long anticipated Federal Reserve interest rate hike is positive for gold prices.
“Money printing and easy credit has … beaten down commodities… Higher interest rates concurrent with a pickup in inflation could result in a rush to a safe haven in commodities and wealth from the earth—natural resources and precious metals, which is historically a hedge against a pickup in inflation… Once rates start moving back up again, that's when we'll see precious metals start moving again as in the 1970s. Gold will top again as it did in the 1980s with record high interest rates, not negative interest rates. Rising rates might be the catalyst for investors to rotate into the commodities, particularly into precious metals…
“’ One of the myths that you always hear is that gold is going to be sold off if interest rates rise. If interest rates rise, that means the powers that be are worried about inflation. Why do we invest in gold? To hedge against inflation.
“’The real myth, especially in the U.S., is that hyperinflation can never come to America. It can happen in Argentina. It can happen in Greece. It can happen in Europe. It can happen in Japan. But it will never happen in the U.S. because the dollar is king. That myth could cost people their fortunes. We have had cheap prices since the 1970s. The greatest misconception is that it will stay like that. But trends change direction. It's wrong to think that just because we've seen a trend in lower interest rates and low inflation that there can't be higher interest rates and higher inflation down the road.’” (“Jeb Handwerger: Fed Interest Rate Increase Could Be Best Thing to Happen to Gold,” Streetwise Reports, 6/29/15.)
Limited Supply To Send Gold Prices Higher – Profit Confidential
Research analyst Moe Zulfiqar believes that limited gold supplies will lead to higher gold prices.
“Don’t pay attention to the current gold prices. Think long-term when looking at the precious metal. As it stands, the fundamentals are improving. This will eventually reflect in prices. I am paying extra attention to the supply side…
“So far, we have heard some miners already giving up as they have stopped their operations… Sadly, there are many more companies that are currently in business and producing. But if they are faced with even a minor issue that results in cash outflow, they won’t be operating for too long…
What does this all mean? All of this will impact production. As mining companies shuffle to keep their business in order, or give up, they are bound to produce less…
“Over the past few years, the mainstream has made it appear that gold is a useless metal and shouldn’t be held in a portfolio. I completely disagree with this claim. I certainly agree that the metal prices are going through a rough phase, and mind you; every asset class does this. Gold is in very similar state.As I see it, just from basic economics, the yellow metal is setting up to reward big-time. Investors should at least keep an eye on it.” (“Gold Prices Headed Higher; Scrutiny at Suppliers Says So,” Profit Confidential, 7/2/15.)