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A disappointing GDP report and weaker than expected stimulus package from the Bank of Japan helped gold prices end the week in positive territory as investors continue to worry about the U.S. economy.
"Gold prices are firmer in early U.S. trading Friday, after a much-weaker-than-expected U.S. GDP report was just released. Prices had been trading near steady just before the data… The U.S. advance second-quarter gross domestic product report came in at up 1.2%, year-on-year. That was a big miss to the downside, as a rise of 2.6% was expected. This report falls into the camp of the U.S. monetary policy doves who do not want the Federal Reserve to raise interest rates...
“The much-anticipated two-day Bank of Japan meeting ended Friday with an announcement from the BOJ that it will double its U.S. dollar-lending facility and double its purchases of exchange-traded stock funds. While it was expected the BOJ would implement some sort of a new monetary policy stimulus package, the announced package was met with disappointment among Asian market watchers….” (“Weak U.S. GDP Report Gives Modest Boost To Gold Market,” Kitco News, 7/29/16.)
Gold ended the week up $28.30, closing at $1,351.40. Silver prices closed at $20.39, up $0.78.
Gold Will Be Supported Under Trump Or Clinton Presidency – ABN
ABN Ambro’s Coordinator of FX and Precious Metals Strategy, Georgette Boele, issued a new research note explaining why gold would be supported under a Trump or Clinton presidency.
“Georgette Boele of ABN Amro in a new research note charts gold movements during US presidencies going back to Gerald Ford 1974–1977 term to ascertain the possible impact on the price during a Hillary Clinton or Donal Trump presidency… Taking into account safe haven demand, interest rates and the dollar Boele argues that on balance a President Tump would be more bullish for the gold price although no matter who is sworn in next year, gold will remain supported:
“‘Gold prices will remain supported if Democrats win…
“‘Our forecast horizon does not cover the four years of the upcoming Presidency. Our forecasts cover up to the end of 2017. Our base scenario (with Democrats wining the elections) suggests that US economic growth will remain below trend, improving only slightly in 2017. Such a result will be supportive for gold prices for the following reasons
1. Inflation will likely be higher than growth
2. Real interest rates are forecast to remain negative (less negative though)
3. The longer-term US dollar has turned negative.
“’These are all supportive factors for gold prices. However, despite uncertainty on financial markets we don’t expect a new major crisis in the making. As a result, safe haven flows towards gold will likely be muted. All-in-all, gold prices will likely rise a moderate pace towards USD 1,650 per ounce over the coming years.
“’…while a Trump victory could result in even higher prices
“’If Trump were to become President (low probability in our view), gold prices will likely perform well, because we expect that his policies will be inward looking and will weaken the fundamentals of the US economy. In addition, his rhetoric and possibly policy actions could create domestic and international uncertainty at beast, and upheaval at worst. Our US economist expects that economic growth would be weaker. This will likely result in a more substantial rise in gold prices towards USD 1,850 per ounce over the coming years…
“ABN Amro forecasts a gold price of $1,350 an ounce by the end of the year, rising to $1,450 an ounce at the end of 2017. That's substantially higher than its previous forecasts which called for triple digits next year.” (“This study puts gold price at $1,850 with Trump win,” Mining.com, 7/25/16.)
Gold Best For Wealth Preservation – TD Asset Management
The Chief Investment Officer for TD Asset Management has chosen gold as the preferred asset for the company’s $230 billion portfolio.
“In a world flush with central bank stimulus and swirling with volatility, Bruce Cooper is pushing for the one asset he says he can count on: gold. TD Asset Management’s chief investment officer is adopting a more conservative approach to focus on capital preservation. Cooper sees gold as the best bet with the global economy stuck in neutral, and as loose central bank policy, the U.K. Brexit vote, and a looming U.S. presidential election stoke demand for havens. The firm, which oversees more than C$300 billion ($230 billion), shifted to "maximum overweight" in gold for its portfolios during the second quarter from a ‘modest overweight’ according to Cooper’s latest market outlook report.
“The U.K.’s vote to leave the European Union is likely to lead to ongoing stress in Europe, Cooper said in an interview after appearing on Bloomberg TV Canada. ‘We turned more positive on gold at the beginning of the year and then we reinforced that in the second quarter… Job one today is about capital preservation,’ he said. ‘It’s not about shooting the lights out….’” (“TD’s $230 Billion Man Goes Maximum Gold as Volatility Mounts,” Bloomberg, 7/28/16.)
Investors Need Gold To Preserve Savings – Barisheff
Nick Barisheff, CEO of Toronto’s Bullion Management Group, advised investors to include gold in their portfolio to preserve their savings.
“Many investors and their financial advisors consider gold to be a commodity, which makes gold no different than copper, timber, pork bellies or orange juice. They do not understand, or simply are unaware, that gold has been successfully used as money for over 3,000 years. Although some people think it is an archaic relic, the facts don’t support this view…
“Gold is traded on the currency desks of all major banks and brokerages, along with dollars, euros, yen and pounds, and not the commodity desks along with other commodities – the FX traders know gold is money.
“On the balance sheets of all central banks, gold is classified as a monetary asset, along with their foreign currency reserves. The central bankers know gold is money. Central banks do not hold any other commodity as part of their reserves. Alan Greenspan knows gold is money, as he laid out in his famous article “Gold and Economic Freedom”, written in 1966, before he became chairman of the Federal Reserve…
“One of the most important attributes of gold is that it is negatively correlated to financial assets, such as equities and bonds, and non-correlated to commodities… When financial assets decline, gold tends to move in the opposite direction, and increases in currency terms. What this means is that gold acts as portfolio insurance to reduce volatility, improve returns, and improve both Sharpe and Sortino ratios…
“For the sake of your financial well-being, take the time to understand what money is, its history and how it is created through the fractional reserve banking system. You will then understand that this 44-year-old experiment with the US dollar as the first global reserve fiat currency will assuredly end in disaster for those who hold their wealth in paper, just like all the other times when this was tried by individual countries.
“You will come to the same conclusion that I and numerous other experts have come to: You need to hold a substantial part of your portfolio in precious metals in order to preserve your savings.
“It is critical to take the time to understand that gold and silver are the most reliable forms of money for preserving wealth. When it becomes obvious to everyone that the system is failing, it will be too late. Unlike paper currencies, you can’t simply print more gold. If even a small percentage of the $250 trillion in global financial assets tries to move into less than $2 trillion of privately held gold, the only variable will be the price, and even then the question will be availability. That is how we will get $10,000 per ounce gold and $250 per ounce silver.” (“Gold and Pork Bellies,” BMG, 7/26/16.)
Gold Production Approaching Production Cliff – Sprott
Sprott Asset Management issued a report that gold discoveries peaked in 2007 and production is heading for a cliff in the near future.
"Gold discoveries peaked in 2007 and production will soon follow, strengthening the value of the yellow metal and possibly fueling a boom in mergers and acquisitions in the gold-mining sector, according to Sprott Asset Management. Discoveries of gold has collapses since then, 'despite exploration budgets increasing by 250% from 2009 to 2012,' Sprott’s gold team said in a recent note. They offered [an] image as an illustration of the ‘impending gold production cliff…’
"It would take an average of 10 to 12 years between a drill hole discovery and the “first gold pour,” the Sprott gold team said. The gold team said that 2015 may end up being the peak global production year for gold… ‘There is a scarcity value in gold that is increasing.’” (“‘Impending gold production cliff’ may deliver a jolt to prices,” MarketWatch, 7/26/16.)