McEwen Sees Gold Rise Up to 44% in 2016 - Bloomberg

Release Date: 
Friday, September 23, 2016

Gold prices ended the week higher as the Federal Reserve once again appeared reluctant to raise interest rates.

“Gold edged back towards the previous session's two-week highs on Friday and stayed on track for its biggest weekly gain in two months, after the Federal Reserve sounded a cautious note on the pace of interest rate hikes. The Fed signaled an increasingly careful approach to future rate hikes after a policy meeting on Wednesday, reassuring
investors who had feared the U.S. central bank could move more quickly to tighten monetary policy…

“ING analyst Hamza Khan said the Fed had been following a pattern of talking up a rate cut ahead of its policy meetings, but failing to deliver. ‘That's the sort of environment where gold will flourish, because it creates uncertainty, and it keeps rates low," he
said. "The rest of the world has also been quite healthy (for gold) -- we've had dovish signals from the Bank of Japan, and we've seen ETF holdings beginning to recover….’” (“Gold heads for best week in two months as Fed fears fade,” Reuters, 9/23/16.)

Gold ended the week up $27.10, closing at $1,338.10. Silver prices closed at $19.78, up $0.92.

McEwen Sees Gold Rise Up to 44% in 2016 - Bloomberg
Rob McEwen, chairman and CEO of McEwen Mining Inc., reaffirmed his bullish views on gold prices to investors and industry insiders attending this week’s Denver Gold Forum.

“Robert McEwen, one of the gold’s industry’s most unabashed bulls, is predicting prices could surge as much as 44 percent by the end of the year as confidence in the economy buckles. The metal could trade in a range of $1,700 an ounce to $1,900 by the end of 2016 as uncertainty builds around the stability of global currencies and sovereign debt, said McEwen, who’s so enamored by bullion that he’s founded two producers: McEwen Mining Inc. and Goldcorp Inc. Record-low global interest rates will cause a “huge amount of anxiety” for investors, who will turn to gold as a store of value and an alternative asset, he said.

“Gold ‘is a currency that doesn’t have a liability attached to it,’ McEwen said Tuesday in an interview at a gold conference in Colorado Springs. ‘A store of value that has gone for millennia. And the big argument against gold used to be it costs you money to store it. Right now, it’s costing you money to store your cash…’

“This also isn’t the first time that McEwen, who expects bullion could reach $5,000 in four years, has made bold predictions for prices. He gave the same outlook in 2009 and 2011 -- the latter forecast came less than five months before gold peaked and then plunged as much as 46 percent to a five-year low reached in December 2015.
This time, McEwen expects a number of catalysts -- from the U.S. election to instability at banks -- could make his prediction come to fruition. ‘You have many more people involved in the market than you ever have before -- crowd psychology is there,” he said. “Reasons for anxiety are multiple than what we’ve had in the past and there will be a triggering event….’ (“Gold Bull McEwen Sees Prices as High as $1,900 by End of Year,” Bloomberg, 9/20/16.)

Investors Will Send Gold to Record Highs on Safe Haven Buying - Parrilla
Diego Parrilla, managing director of commodities for global wealth manager Old Mutual Global Investors, forecasts new record gold prices as investors seek a safe haven asset to protect against asset bubbles.

“Gold will likely soar to a record within five years as asset bubbles burst … forcing investors to find a haven, according to Old Mutual Global Investors’ Diego Parrilla. The metal is at the start of a multi-year bull run with a ‘few thousand dollars of upside’ in a world of ‘monetary policy without limits’ where central banks print lots of money and low or negative interest rates prevail, said Parrilla, who joined the firm as managing director of commodities last month. He’s worked at Goldman Sachs Group Inc. and Bank of America Merrill Lynch.

“’As some of the excesses in other asset classes get unwound, gold will perform very strongly,’ said 43-year-old Parrilla, who has almost 20 years’ experience in precious-metals markets. The ‘perfect storm scenario will mean that gold will perform best when other classes are doing worst…’
“Parrilla joins a slew of investors who are bullish on gold because of low borrowing costs and central-bank bond buying. Billionaire bond-fund manager Bill Gross has said there’s little choice but gold and real estate … while Paul Singer, David Einhorn and Stan Druckenmiller have all expressed reasons this year for owning the metal.

“Some are not confident prices will rise. The probability of three rate hikes through end-2017 means there’s little room for rallies, according to Luc Luyet, a currencies strategist at Pictet Wealth Management. Cohen & Steers Capital Management, which oversees $61 billion, has pared its gold allocation, while investor Jim Rogers said after the Brexit vote in June that he’d rather seek a haven in the dollar than bullion…

“’If we’re able to normalize global monetary policy, and we can do that in a way that doesn’t result in the implosion of some of the bubbles we’ve been building, the appeal of gold as a safe haven might diminish,” Parrilla said. “But I think it’s highly unlikely we will have a very smooth unwind of all these years of monetary excess....’” (“Gold Seen Entering a Long-Term Bull Cycle,” Bloomberg, 9/21/16.)

Two Factors Support New Gold Bull Market – Motley Fool
Motley Fool contributor Adam Mancini wrote that strong supply/demand fundamentals and lower interest rates will support the next increase in gold prices.

“The price of gold has risen about 27% since the start of the year—recently closing at $1,318 per ounce—and while it has pulled back slightly, analysts at Royal Bank view any pullback as a buying opportunity. According to Royal Bank, gold has entered into a new bull market and predict gold will rise to $1,500 per tonne in 2017, 14% above current levels.

“This is in line with the vast majority of gold analysts. Bank of America and Credit Suisse see gold at $1,500 in 2017, and firms like Natixis and UBS see gold rising to $1,400 per ounce by the end of this year. The bullish consensus on gold can be explained by a few key factors, and, combined, these factors will support the next run-up in gold prices…

“Central banks typically hold gold as part of their foreign currency reserves due to its status as a safe-haven asset and store of value. In an uncertain economic environment with low interest rates, gold is seen not only as a protector against inflation and other economic risks, but as a means of diversifying away from U.S. dollar–denominated assets (the primary component of global central bank reserves)…

“The period since 2008 … would be the longest period of gold additions by central banks since after World War II... This is a sign that gold is once again becoming a key component of central bank reserves, which provide a supportive backdrop for gold prices.

“This source of demand will coincide with a diminishing supply outlook. Chuck Jeannes, Goldcorp.’s CEO, sees gold as hitting peak supply in the next year or two, which means that gold production will decline annually going forward…

“As long as interest rates globally remain low, the opportunity cost of holding gold will shrink and demand for it will grow. Gold’s main drawback as an investment is the fact it pays no yield, but when global bonds also pay no yield (or, in some cases, have a negative yield), it pays to hold gold….” (“2 Reasons Gold Is Setting Up for a Historic Bull Market (and How to Profit),” Motley Fool, 9/22/16.)

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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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