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Gold and Silver Prices
Gold prices retreated on Friday but remained largely unchanged from last week’s close after Federal Reserve Chair Janet Yellen affirmed the Fed’s plan to raise interest rates sometime in 2015.
“Gold was trading lower on the London spot market on Friday, after Federal Reserve Chairwoman Janet Yellen said a rise in U.S. interest rates is likely to happen later this year, which supported the dollar… As a result, ‘the dollar strengthened and some selling was noted in gold,’ David Govett, head of precious metals trading at Marex Spectron, said in a note… Looking ahead, seasonal demand from China is seen to boost the price of the precious metal. China accounts for roughly a quarter of global gold demand.” (“Gold Falls on Janet Yellen Speech, Palladium Gains on Emissions Scandal,” WSJ, 9/25/15.)
Gold finished the week up $5.80, closing at $1,146.70. Silver prices closed the week at $15.16, down $0.12.
Gold Ready to Resume Bull Market – Money Morning
Money Morning’s Resource Specialist, Peter Krauth, sees a resumption of gold’s market given the continuing weakness in the global economy.
“Interest rates are an important factor in the gold price forecast, so it's a good time to get an update on the yellow metal since the Sept. 17 Fed meeting pushed a rate hike down the road…
“Fed Chairwoman Janet Yellen failed to give clear guidance on when rates will be raised, except to say the first increase could occur at any future meeting. And she still expects it will happen in 2015…
“The Fed indicated that weakness in the global economy caused its participants to vote against a rate hike. But if that weakness persists, it could keep the Fed from any kind of significant rate increase for some time.
And that could continue to bolster gold … and send prices higher. After four years of correcting and forming what looks like a double bottom around the $1,100 mark, gold seems ready to resume its long-term secular bull market.” (“Gold Price Forecast Sees Rise Before 2016 – Check Out the Charts,” Money Morning, 9/23/15.)
Weaker Dollar Will Lead to Higher Gold Prices – MarketWatch
MarketWatch reported that the Federal Reserve’s decision to defer an interest rate hike signals dollar weakness which should lead to higher gold prices.
“Gold … got a nice bounce Thursday when the Federal Reserve punted on raising interest rates. Likewise, the yellow metal was exceptionally strong leading up to the Federal Open Market Committee meeting, as the crowd finally figured out that the central bank wouldn’t hike rates. But for gold investors, the fun has only just begun. And they can thank the Fed.
“We can get a 20% to 30% rally from the recent lows,” suggests Lawrence McDonald, head of U.S. macro strategy at Societe Generale… McDonald, author of ‘A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers,’ is worth listening to because he has made several good trading calls on gold in the past few years…
“McDonald is bearish on the dollar because of trends blocking the Fed from raising rates, obstacles readily acknowledged by Federal Reserve Chairwoman Janet Yellen in the press conference following Thursday’s FOMC meeting… here are five reasons why the dollar will weaken, pushing gold higher.
“Reason 1: The Fed has a dollar problem… ‘The dollar has been a global wrecking ball,” says McDonald. “My theory is the Fed is terrified of the dollar’s move, and they have to talk the dollar down to $85 to put out this fire. That’s really good for gold…’
“Reason 2: The Fed has a broader mandate now… the Fed has lots of ‘crosscurrents’ to consider. “We need to put it all together in a picture,” she said during the press conference. The big picture is that there are too many problems to raise rates. Weak dollar, strong gold.
“Reason 3: The Fed just got a lot more dovish… Yellen also made it clear that even after the first rate hike — whenever it happens — monetary policy will remain quite accommodative.
“Reason 4: The Fed has an election problem. Consensus forecasts have shifted to a Fed rate hike in December. But that’s not going to happen for at least two reasons. First, Fed rate hikes can slow the economy with six-month lag. Does Yellen, appointed by President Barack Obama, really want to risk slowing the economy during the summer of 2016, thereby hurting the prospects of the Democratic presidential candidate? Next, raising rates during the holiday season just looks Grinchy…
“Reason 5: Being long the dollar is a crowded trade… “There are a lot of people on the wrong side of the trade… so many people are long the dollar, there could be a sustained move down in the greenback, as these punters back away from the trade. That means there may be a sustained up move in gold…. If you do go long gold … remember: Don’t get greedy.” (“Why the Fed is driving gold prices higher,” MarketWatch, 9/19/15.)
National Debt And Gold Prices
Gary Christenson, the owner and writer for the contrarian investment site “Deviant Investor,” explored the relationship between government debt and gold prices.
“Since the gold price peak in 2011 the Federal Reserve has “generously” supplied the world with trillions of dollars of newly created digital and paper debt, all backed by nothing but faith and credit… Debt is massively higher and gold is still bumping around a bottom…
“The US national debt has steadily increased. Examine the following two graphs regarding gold and the national debt… WHAT THESE GRAPHS SHOW:
“Gold prices could (I doubt it) fall further in the short term… However, it is only a matter of time, whether it is days or months, before the consequences of massive debt and uncontrolled “printing” of unbacked debt based fiat currencies sink more of the world into ‘Venezuela conditions.’ Paper currencies, central banks and delusional paper promises will fail. We need something better. Gold and silver come to mind…” (“Gold: The End and The Beginning,” The Deviant Investor, 9/22/15.)
No Logical Reason Not To Own Gold and Silver – Cooper
Peter Cooper, editor and publisher of the financial website ArabianMoney, explains why investors should be buying gold and silver.
“Investors have no logical reason left not to buy gold and silver. The Federal Reserve is clearly involved in a failing bluff on interest rates that it dare not raise because the global economy is entering a recession… Absent interest rate rises there is no logical reason for gold prices to stay at these levels. They only got this low because interest rates were supposed to be going up. Now they are not and so gold prices have a lot of room to increase. The Fed’s bluff is over…
“Indeed, looking forward and what we must have on the horizon is a more accommodative monetary policy, not tightening. Interest rate rises will not happen next year. Far from it, we should be considering the impact of negative rates and some kind of QE4 money printing program…
“We are also going to see bankruptcies and business failures. Then there is the impact on the banks who have lent them money. What about the many hundreds of billions of dollars that Western banks have lent to Chinese corporates? This is the stuff of a major banking crisis.
“Now where do people put their money when they can’t trust banks or governments? They flee into precious metals. And as they do so the demand for gold and silver rises sharply while the supply is necessarily constrained by limited stockpiles and falling production levels… Well gold hit its bottom last month, and now the only way is up. There is no logical reason left not to buy gold and silver.” (“No logical reason left not to buy gold and silver as the Fed’s bluff on interest rates is over,” ArabianMoney, 9/25/15.)