Time To Buy Gold Is Now – Rickards

Release Date: 
Friday, July 21, 2017

Gold prices rose approximately 2% this week on a weaker dollar and political turmoil.

“Gold prices logged their highest settlement in a month on Friday, tacking on more than 2% for the week, as turmoil in the White House and weakness in the U.S. dollar spurred haven demand for the precious metal … U.S. President Donald ‘Trump’s team falling apart and the investigation about Russian involvement [in the election] are the reasons' for the steeper climb in gold prices Friday, said Naeem Aslam, chief market analyst at ThinkMarkets UK …

“On Friday, gold breached thresholds that market technicians tend to view as indicating a bullish trend is under way … ‘The dollar has been under serious assault, which has pushed the price of gold higher,’ said Aslam. ‘As long as the dollar bleeds, we do think that the gold price would continue to move higher and could touch the level of $1,300….’” (“Gold logs highest finish in a month, up over 2% for the week,” MarketWatch, 7/21/17.)

Gold ended the week up $26.10, closing at $1,255.50. Silver prices closed at $16.60, up $0.40.

Time To Buy Gold Is Now – Rickards
Jim Rickards, author of New York Times best seller Currency Wars: The Making of the Next Global Crisis, wrote that investors need to buy gold as a defensive position to the inevitable crash.

“Last week the Fed raised the white flag on further rate hikes. There won’t be any for the foreseeable future … The problem, as usual, is that the Fed’s theories bear no relation to reality … The result of applying an obsolete theory will be an economic crack-up, probably in the form of a recession. This will produce a 20% decline in stock prices at best, and possibly a 30% market crash before the end of the year. This will be caused by Fed tightening (whether by the policy rate or balance sheet reductions) into weakness…

“Tight money, a weak economy, and a stock market bubble is a classic recipe for a stock market crash. It’s time for investors to go into a defensive crouch by … reallocating assets to cash, Treasury notes, gold and gold mining shares. In particular, gold will be the big winner when the Fed suddenly realizes its blunder and has to pivot quickly to ease, probably by late summer. The time to position in gold is right now.” (“The Fed Has Hit the ‘Pause’ Button,” Daily Reckoning, 7/18/17.)

Wall Street And Main Street Bullish On Gold
Kitco’s weekly survey of professionals and “main street” votes found a majority of both are bullish on gold prices.

“Traders and analysts cited the continuing turmoil surrounding the U.S. presidency of Donald Trump, weakness in the U.S. dollar and technical-chart momentum. Eighteen professionals took part in a Kitco News Wall Street survey. Thirteen voters, or 72%, see gold prices rising by the end of next week. Four voters, or 22%, look for a sideways market, while just one, or 6%, said lower. The Kitco online Main Street poll resulted in 974 votes, with 567 participants, or 58%, calling for gold to climb over the next week. Another 269 voters, or 28%, said that gold will fall, while 138, or 14%, were neutral …

“So far in 2017, but not counting the current week, Wall Street forecasters collectively were right 17 of 27 times for a winning percentage of 63%. Main Street was right 16 of 26 times for 62%.

“’Technicals are turning more bullish, including a fledgling price uptrend in place on the daily bar chart,’ said Jim Wyckoff, senior technical analyst with Kitco … Adam Button, currency analyst with Forexlive.com, also looks for gold to continue its recovery from multi-month lows reached earlier in the month. ‘The U.S. dollar is struggling and there is nothing in the calendar in the week ahead that threatens to turn the tide,’ he said….” (“Wall Street, Main Street Agree: Gold Rally To Continue,” Kitco, 7/21/17.)

Gold Important Diversifier For Weaker Dollar – Murenbeeld
Economist Martin Murenbeeld anticipates a weaker US dollar which favors gold prices. As such, he plans to add to his gold position as the dollar falls.

“A weaker U.S. dollar, which is trading at fresh 10-month lows, is a symptom of a bigger issue, which could end up being positive for gold, according to one famed economist.
In a recent interview with Kitco News, Martin Murenbeeld, president of Murenbeeld & Co., said that that he is expecting to see further weakness in the U.S. dollar as uncertainty grows over President Donald Trump’s administration …

“Investors are selling the U.S. dollar after the Republican-controlled Senate pulled its proposed bill to replace and repeal the Affordable Care Act, commonly referred to as Obamacare. With Congress unable to pass health-care reform, investors are starting to raise doubts that the government will be able to push through tax and regulatory reform … But it’s not only the U.S. dollar that will suffer as these doubts surrounding the Trump administration continue to grow; Murenbeeld said that equities have seen significant gains following Trump’s election victory, but he doubts the market can hold at record levels as the government is unable to pass key legislation …

“’At some point, equity markets are going to have to adjust if Trump’s policies can’t go through, and that suddenly makes gold very interesting … If U.S. economy stays low and inflation stays low, it is very difficult to see the Fed raise interest rates,’ he said. ‘So I would hold gold as an important diversifier and I don’t worry about whether it is going up or down 20 bucks.’” (“Gold Interesting As Doubt Grows Over Trump's Fiscal Agenda – Murenbeeld,” Kitco, 7/18/17.)

U.S. Dollar Falls To 2 Year Low; Further Losses Expected – CNBC
“The dollar is crumpling under pressure, and there doesn't appear to be much to stop it. European Central Bank President Mario Draghi was the latest catalyst, sending the euro higher with comments that the ECB would discuss when to start paring back its bond purchases in the fall. While some viewed the central bank president as a bit vague, his words still drove the euro to a near two-year high against the dollar …The greenback is now down 10 percent this year against the euro.

“The dollar's decline Thursday is a continuation of a weakening that started last week after Fed Chair Janet Yellen voiced concerns about low inflation and talked about a lower than historic neutral rate. That drove down the dollar, and bond yields moved lower, as expectations for another Fed interest-rate hike this year faded … Robert Sinche, chief global strategist at Amherst Pierpont, said the dollar got another kick lower Thursday on news reports that special counsel Robert Mueller expanded his Russia probe to Trump's businesses …

“"There's no resistance to a lower dollar," Chandler said. Just last week, Chandler and others had believed the dollar could finally be getting ready to move higher, as sovereign yields rose on the view that global central banks were getting ready to tighten. But the Fed's comments discouraged that view, and the Fed is being written off as a non-factor even as it is set to meet next week ….” (“Bottom falling out of US dollar: Drops to near 2-year low vs the euro, 2017 loss now 10%,” CNBC, 7/20/17.)

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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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